VAT road fuel scale charges help businesses calculate VAT owed on fuel used for private consumption of fuel in company vehicles, with HMRC providing standardised rates based on CO2 emissions
Drivers have been warned about updated VAT road fuel charges introduced by HMRC this month. The change will impact businesses across the UK that use vehicles for both business and private journeys.
VAT road fuel scale charges help businesses calculate VAT owed on fuel used for private consumption of fuel in company vehicles. Instead of keeping detailed mileage logs to separate business and personal fuel usage, HMRC provides standardised rates based on CO2 emissions, with more polluting cars paying more.
These rates help businesses simplify their VAT calculations by paying a fixed fuel scale charge rather than manually tracking every private journey.
The flat rate values apply to one person in connection with a specific vehicle for the relevant accounting period, but HMRC has warned that for employees, these charges can result in significant tax implications if not properly managed.
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According to HMRC, businesses are required to report these charges on their VAT returns to comply with existing regulations.
Carolyn O’Shea, VAT and indirect tax senior manager at MHA, said: “The VAT road fuel scale charge calculates VAT due to HMRC on road fuel for vehicles used for both business and private purposes. This method allows you to reclaim input tax on fuel without having to keep detailed records of the split of business and private uses of the vehicle.”
The charges are reviewed each year, and these ones will run until April 30, 2026. This year’s charges have reduced since last year with vehicles with CO2 emissions of 120g/km or less seeing the annual charge drop from £702 to £661.
For mid-range vehicles with emissions of 175, the annual charge has fallen from £1,752 to £1,652. Even vehicles with the highest emissions (225g/km or more) have seen charges reduced from £2,454 to £2,314 annually.
For monthly charges, low-emission vehicles are now charged £54 in VAT instead of £58, and high-emission vehicles are charged £192 instead of £203.
For vehicles too old to have a CO2 emissions figure, drivers must inform HMRC of the CO2 band based on the car’s engine size. The tax office advised that if a car’s cylinder capacity is 1,400cc or less, use CO2 band 140g; for engines more than 1,400cc but less than 2,000cc, businesses should use CO2 band 175g, and for engines more than 2,000cc, use CO2 band 225g or more.
HMRC explained: “You’ll need to work out the correct road fuel charge, based on your car’s CO2 emissions, and the length of your VAT accounting period. This will be either one, three, or 12 months.”
If the CO2 emission figure is not a multiple of five, it should be rounded down to the next multiple of five. The lower figure should be used for bi-fuel vehicles with two CO2 emissions figures.
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