AT on fuel can be a confusing area for many business owners. Whether you’re a sole trader, limited company, or contractor, understanding what you can reclaim — and how — can make a real difference to your bottom line.
In this blog, we break down how VAT on fuel works and what your business needs to know to stay compliant and tax-efficient.
1. Can I Reclaim VAT on Fuel?
Yes – but only in certain situations. If your business is VAT-registered and uses fuel for business purposes, you may be able to reclaim VAT. However, the way you reclaim depends on how the fuel is used.
2. Three Main Options for Reclaiming VAT on Fuel
🔹 1. Business-Only Use
If the fuel is used strictly for business purposes (e.g. a company van not used personally), you can reclaim 100% of the VAT.
What you need:
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VAT receipts or invoices
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Mileage records to support business use
🔹 2. Mixed Use (Business and Personal)
If the vehicle is used for both business and personal journeys, you still have options:
Option A: Reclaim all VAT and pay a fuel scale charge
This is a flat-rate charge based on the vehicle’s CO₂ emissions. It simplifies things but assumes personal use is taking place.
Option B: Only reclaim VAT on business mileage
To do this, you’ll need to:
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Keep detailed mileage logs
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Use accurate fuel receipts
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Apply the correct VAT rate to business-use portion
🔹 3. Personal Use Only
If the fuel is for personal use only (not related to your business), you cannot reclaim any VAT.
3. What is the Fuel Scale Charge?
The fuel scale charge is a fixed amount you pay back to HMRC if you reclaim VAT on fuel used for both business and personal journeys. It’s designed to simplify VAT reporting by avoiding the need for detailed mileage tracking. However, it only makes sense if the business mileage is high enough to justify the reclaim.
Check the current fuel scale charge rates on the HMRC website — they’re updated annually.
4. What Records Should I Keep?
Regardless of which option you choose, you must keep:
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VAT receipts for all fuel purchases
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Mileage records (especially for mixed use)
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Details of the vehicle(s) involved
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Any calculations used for VAT claims
5. What About Electric Vehicles (EVs)?
Electricity for business vehicles is treated differently than fuel. You can reclaim VAT on electricity used to charge business EVs — but only if the charging is done at the business premises or separately billed.
Conclusion
VAT on fuel is reclaimable, but the rules vary depending on how the vehicle is used. Choosing the right method and keeping proper records can help you save money and avoid issues with HMRC.
Need Help With VAT?
At Rothstone Accountants, we help businesses stay VAT-compliant while maximising legitimate claims. If you’re unsure which method is best for you, get in touch for a tailored consultation.
