What happens if I need to reclaim VAT on business fuel?

Managing your business’ finances can be a challenging task at times, in particular keeping down the costs.

Fuel costs, in particular, can be a significant drain on a business’ finance, so reclaiming the VAT can be an important cost-cutting method. It is often a complex process, however, we are here to help.


How do I know if my business is eligible?

To be able to reclaim VAT on fuel, your business must be eligible to claim VAT on mileage. Any VAT registered business which is not part of a flat rate scheme can reclaim VAT on the fuel portion of a business trip.

The business must also employ the drivers, this means that contractual staff or freelancers are not eligible to claim mileage with your business because they are employed by a separate entity and a business cannot claim the input VAT on behalf of another business.

If you are self-employed, you are also eligible.

It is important to remember that your business can only make a VAT claim on mileage expenses if you have eligible VAT receipts to support the claim.


What portion of the fuel can I claim on?

In order to calculate the amount your business can reclaim through VAT, you will need to first work out the fuel portion of a mileage claim. To do this you use the HMRC advisory fuel rates, this applies whether you or the employee drives their own car or a company car.

These rates change every three months, the rates in force from March 2019 to May 2019 are:

Engine Size Petrol – amount per mile LPG – amount per mile
1400cc or less 11 pence 7 pence
1401cc to 2000cc 14 pence 8 pence
Over 2000cc 21 pence 13 pence


Engine Size Diesel – amount per mile
1600cc or less 10 pence
1601cc to 2000cc 11 pence
Over 2000cc 13 pence

Hybrid vehicle drivers should use the lower of the petrol and diesel rates for their engine size. If the car is fully electric, you can apply the Advisory Electricity Rate (AER) of 4p per mile.

Once you have your rate, you need to work out your fuel portion, this is done by multiplying the number of business miles driven by the AFR.


How do I work out how much VAT I can reclaim?

Once you have worked out the fuel portion, you can determine the amount of VAT your business can claim on business mileage by dividing the fuel portion by six as VAT currently stands at 20 per cent and has already been included on the fuel.


How can McGills help?

We understand that running a business can be a challenging and time-consuming process, with managing costs an increasingly difficult task. That is why we want to help you save money in your business wherever possible through methods such as tax reliefs and claiming back VAT.

If you are unsure about anything mentioned in the article above, then it is important that you contact our expert team today for a more in-depth discussion.