Road Fuel Scale Charges, changing UK law to comply with EU law and streamlining the scheme
How the Government intends to correct the position and improve the scheme
Retaining fair options for taxpayers
Taxpayers have had the following three options under the UK law and concessions combined. They are:
- Claim no input tax on road fuel and declare no deemed supplies and thus not have to pay output VAT
- Maintain accurate mileage records so that business and private motoring can be identified and use them to either claim only VAT on road fuel used in business journeys or charge staff accurately for the fuel they use privately
- Claim all input tax on road fuel and declare Road Fuel Scale Charges
These are all fair ways of treating road fuel. The planned changes will ensure that these options remain available to all taxpayers, but wholly under UK law that correctly implements the UK’s derogation from the PVD.
Ensuring consistency and fairness
For businesses which charge employees an amount that is below the cost value of the fuel provided for private use, a provision will be made in Schedule 6 that will require that VAT is accounted for on the open market value of the fuel. This will ensure consistency with the VAT treatment of other businesses providing fuel private use. If accurate mileage records cannot substantiate the true value of the fuel supplied for private use, the RFSC can be used. This will be set out in HMRC guidance after the law has changed.
Taxpayers who do not keep accurate mileage records will continue to have a choice not to use the RFSCs by not claiming any VAT on road fuel as input tax. If VAT on road fuel is not treated as input tax then minor charges to employees for private use fuel will not be taxable supplies.
The Partial Exemption (PE) concession
HMRC will have to withdraw this concession. HMRC intend to announce its withdrawal, after a transitional period, when the response document to this consultation is published.