Recovery of VAT on Road Fuel Purchased by Employees
HMRC have announced some changes in the way in which VAT on road fuel purchased by employees can be recovered by their employers - effective from 1 January 2006.
These changes come as a result of the conclusion of a recent European Court of Justice (ECJ) case, which found that the current UK VAT recovery system infringed EU law.
Previously:
Employees bought fuel for business journeys and claimed this back from their employers (usually via an expense claim form). Employers tended to pay either a mileage allowance or directly reimburse the cost of the fuel. The employer could then reclaim the input VAT on this reimbursement on his VAT return.
New Treatment:
Employers can continue to recover input VAT incurred by employees on fuel costs that are either reimbursed on the basis of cost or through a mileage allowance provided that:
The fuel is used in the business to make taxable supplies and
The employer has a valid VAT invoice for the fuel (till receipts will be acceptable in most cases)
Therefore it is now more important than ever that a proper expenses management system is put in place by the employer to ensure that these criteria are met. Andrew Webster Ltd would be happy to advise on an appropriate system to meet your specific business needs.
To find out more about recovery of VAT on road fuel purchased by Employers, please call us at +44 (0)1223 507080 or email at info@tax.uk.com
Important: This note is for the purpose
of guidance only and further professional advice should be obtained from
your Account Manager before acting on any information contained herein.
Andrew Webster Limited will not accept any responsibility for loss caused
to any person(s) whatsoever as a result of action taken or refrained from
based on the content of this note.
