Are you a UK business owner? If yes, then you must know that fuel costs can rapidly become a significant business expense for many UK business owners. That is why reclaiming VAT on fuel is not always as straightforward as it appears. If the business is VAT-registered, reclaiming VAT can help reduce these costs. The right treatment depends on whether the fuel is used for private travel, business travel, or a combination of both.
As a VAT-registered business, you need accurate mileage records and valid VAT receipts to reclaim VAT on fuel. Moreover, a business can reclaim VAT on business fuel, apportion the claim for mixed use, or recover the full amount and apply a road fuel scale charge for private use. This guide clearly explains how you can reclaim VAT on fuel, who is eligible, how much VAT you get back, and the current rules for reclaiming VAT on petrol.
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Who is Eligible for Reclaiming VAT On Fuel in the UK?
Before going into the process of reclaiming VAT on fuel, you first need to know who is eligible. UK Businesses that are VAT-registered are eligible to reclaim VAT on fuel, provided that the fuel is used for business purposes. Businesses using the VAT Flat Rate Scheme generally cannot reclaim VAT on day-to-day fuel purchases, except in limited circumstances for qualifying capital assets (which fuel is not).
Can a Company Claim VAT On Fuel?
Yes, if your business is VAT-registered, you are eligible to claim fuel exclusively used for business purposes, provided you have a valid VAT receipt or invoice. Typically, reclaiming VAT on fuel includes petrol, diesel, and other qualifying road fuels. However, the amount you can claim depends on whether the fuel is used exclusively for personal travel or for business.
You use the HMRC fuel scale charge to calculate VAT for private use, instead of documenting each personal journey, if the vehicle is used for both personal and business purposes. In addition, if you use the fuel scale charge method, you are required to apply the current scale figures that match your vehicle’s carbon emissions for the right accounting period.
When Can You Claim VAT On Petrol?
As previously stated, you can reclaim VAT on petrol used for business purposes, provided you have a valid VAT receipt, if your business is VAT-registered. Furthermore, when the same car is used for both personal and business purposes, various VAT rules apply. You can reclaim VAT on business fuel or reclaim all VAT by applying the fuel scale charge for private use, depending on your situation. Different scenarios used for reclaiming VAT on fuel are:
For Business Use Only
You can claim the full VAT on fuel if the vehicle is used exclusively for business purposes and you have valid VAT receipts.
Mixed Business and Private Use
You can reclaim VAT only on the fuel used for business journeys by maintaining detailed mileage records. Alternatively, you can also reclaim all VAT on fuel through the fuel scale charge to account for private use.
Employees’ Cars (Using Their Own)
Where employees use their own vehicles for business travel, the business can reclaim VAT only on the fuel element of the mileage allowance, using HMRC Advisory Fuel Rates and valid VAT fuel receipts. The claim is calculated using HMRC Advisory Fuel Rates and requires valid fuel receipts.
Leased company cars
The 50% restriction on VAT on lease payments applies if you use leased company cars for private use. However, fuel VAT follows a separate set of rules managed through specific accounting choices.
Flat Rate Scheme
Businesses generally cannot reclaim VAT on everyday purchases and expenses under the UK’s VAT Flat Rate Scheme. The single-purchase capital assets over £2,000 exception specifically excludes fuel, which means that road fuel and general running costs cannot be reclaimed.
How Much VAT Do Businesses Get Back On Fuel in the UK?
Reclaiming VAT on fuel depends on whether your business is VAT-registered and how you use the fuel. In reality, the entire VAT can be claimed if the fuel is exclusively utilised for business purposes. Conversely, if you use it for both personal and business purposes, you can either reclaim VAT only on the business fuel or claim the full VAT and account for private use using the HMRC fuel scale charge. Whereas when business employees use their personal vehicles for business purposes, VAT can be claimed only on the fuel portion of their mileage.
What are Fuel Charges for Businesses in the UK?
By using fuel scale charges, HMRC streamlines the process of reclaiming VAT on fuel used in a company car for both private and business purposes. You account for a fixed VAT amount instead of calculating the exact VAT related to private fuel use. This depends on the length of your VAT accounting period and your vehicle’s CO₂ emissions.
HMRC updates the fuel scale charge tables annually with effect from 1 May (published around April). You can access the most recent rates on HMRC’s website, so it is recommended to visit HMRC’s official website. Subsequently, the charge is added into your VAT return as output tax. As a result, it increases the VAT you owe for the specified period.
Example: How Fuel Scale Charges Work
Let’s understand with an example:
Assume you are VAT-registered and use your company vehicle for both personal and professional purposes. Over a quarter, you spend £600 on fuel, which includes £100 VAT.
You decide to reclaim the full £100 of VAT, and your vehicle’s carbon emissions place it in a fuel-scale charge band of £90 for the same quarter. Consequently, you keep a net VAT benefit of £10 (£100 reclaimed – £90 paid back) without the necessity of determining the precise quantity of private fuel consumption.
Can You Reclaim VAT On 45p Mileage?
Yes, you can reclaim VAT on mileage allowances only. However, you cannot claim the full 45p rate. This is because you can claim only the fuel portion of the rate, not the entire amount. Remember that for the 2026/27 tax year, the approved mileage allowance for the first 10,000 business miles increased from 45p to 55p per mile. You cannot calculate the VAT using the Approved Mileage Allowance Payments (AMAP) flat rates (45p/25p) when reclaiming VAT on business mileage for a private car used for work.
Furthermore, AFRs officially apply to company cars, though businesses use the fuel portion calculation derived from them (or similar fractional logic) to reclaim VAT on employee-owned cars. HMRC Advisory Fuel Rates (AFRs) are important because they help companies calculate private fuel repayments or reimburse employees for business travel in company cars.
What If I Just Do Not Claim Any VAT On Fuel?
If you choose not to claim any VAT on road fuel for your business, you simply do not recover any input tax on your fuel purchases. Additionally, you are not required to account for output tax through fuel scale charges for private mileage. This reduces the need for complex mileage tracking or the payment of fixed charges that exceed your reclaimable amounts.
What Records Do You Need For Reclaiming VAT on Fuel?
When reclaiming VAT on fuel in the United Kingdom, you must maintain valid VAT fuel receipts and accurate mileage logs for business travel. You must also keep records that show the application of fuel scale charges. These financial records must be kept for 6 years.
The Bottom Line
Reclaiming VAT on fuel can reduce the costs of business motoring; however, the appropriate treatment depends on the vehicle’s usage and whether private journeys are involved. That is why VAT-registered businesses should maintain accurate mileage records, maintain valid fuel receipts, and follow HMRC-approved methodology. Consequently, clear documentation and regular reviews can prevent overclaims, missed relief, and issues during an HMRC inspection.
Whether you’re just forming your company or already knee-deep in paperwork, our London-based accountants are ready to jump in. One quick call and we’ll figure out what you actually need.
Need Expert Support With Reclaiming VAT on Fuel?
Managing VAT on fuel can be difficult when vehicles are used for both personal and business purposes. That is where the right support matters. At LimitedCompanyAccountants, our accountants can evaluate your fuel expenses, mileage records, and VAT receipts and ensure any private use is treated appropriately. Additionally, we help calculate recoverable VAT, evaluate fuel scale charge treatment, and reduce the risk of errors in your VAT returns.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.
