Reclaiming VAT on Business Fuel: What You Need to Know

Introduction: Can You Claim VAT on Fuel?

If your business uses vehicles for work-related journeys, you may be eligible to reclaim VAT on the fuel you purchase. However, as with many areas of tax, there are specific conditions and calculation methods you must follow. In this guide, Wingate Accountants breaks down your options and obligations—so you can reclaim VAT correctly, efficiently, and in line with HMRC rules.

What Fuel VAT Can Be Claimed?

VAT can be reclaimed on fuel only when it is used exclusively for business purposes. This means any personal use—such as commuting, school runs, or weekend travel—invalidates a full claim.

To claim 100% of VAT on fuel, you must be able to demonstrate that the vehicle is not used privately at all. For example, vans kept at a depot overnight and used solely during business hours would typically qualify for full VAT recovery.

Example: When Full VAT Can Be Reclaimed

A telecoms engineering firm operates vehicles equipped to install and maintain utility poles. These vehicles are kept at a secure site overnight and are not used for personal journeys. In such cases, reclaiming the full VAT on fuel purchases is generally acceptable.

Claiming VAT Using Business Mileage Records

If your company vehicles are used for both business and private trips, you can still reclaim VAT, but only on the business portion. This method is known as the actual use basis.

You’ll need to maintain:

• Detailed mileage logs (with date, start/end locations, and purpose)
• Receipts for all fuel purchases
• Proof of reimbursement to employees (if they pay for fuel themselves)

Advisory Fuel Rates: A Useful Tool

To reimburse employees fairly and avoid triggering a Benefit in Kind, use HMRC’s Advisory Fuel Rates. These rates vary depending on the engine size and type of fuel used and are updated regularly by HMRC.

By using these rates:

• The business can reimburse the employee for business travel
• VAT can be reclaimed on the reimbursed amount
• The employee’s private use can be offset by charging for personal mileage

Alternative Option: The VAT Fuel Scale Charge

If it’s difficult to separate business from personal use, you can reclaim VAT on all fuel and apply a fuel scale charge instead. This is a fixed rate based on the vehicle’s CO₂ emissions and is updated annually by HMRC.

How It Works

For example, a company operating a BMW 318i with a CO₂ rating of 146g/km would apply a quarterly scale charge. Based on the 2025–2026 rates:

• Fuel scale charge: £313 per quarter
• Net expense: £260.83 against Corporation Tax
• VAT reclaim: £52.17 on the VAT return

This method is ideal for companies with high fuel usage and mixed journey types, as it reduces admin and ensures compliance.

Is It Worth Claiming VAT at All?

In some cases—such as low mileage usage or hired vehicles—it may not be worth the effort to track fuel VAT. If your calculations show that admin time outweighs the VAT reclaimed, you may choose not to claim at all.

Choosing the Right Method: Be Consistent

HMRC requires businesses to apply a consistent VAT recovery method across all vehicles. You cannot use different approaches for different vehicles within the same business.

Whether you opt for actual mileage tracking or the scale charge, it’s important to use that method across the fleet to ensure uniformity and compliance.

Practical Case Studies

🚕 Taxi Operator

A business runs four taxis from a lock-up garage. Drivers log mileage electronically, and the cars are never used personally.
Best method: Full VAT recovery on fuel.

🎨 Graphic Designer

A designer uses public transport and rarely drives their business vehicle. Mileage is minimal and VAT recovery is negligible.
Best method: Consider not reclaiming VAT on fuel.

🏥 Domiciliary Carer

A carer uses a company car for daily visits. Occasionally, the car is used privately. The company reimburses fuel and charges for personal miles.
Best method: Use actual mileage with employee contributions.

🔧 Field Installer

An installer takes a company vehicle home and uses it for both business and limited personal journeys.
Best method: Apply the VAT fuel scale charge to simplify admin.

Need Expert Help with Fuel VAT?

At Wingate Accountants, we help businesses across the UK navigate VAT rules confidently. Whether you’re unsure which method is right for you or need help preparing compliant VAT returns, we’re here to support you.

📞 Call us today: 0161 531 4179
💬 Email us: enquiries@wingateaccountants.co.uk