Section A: Objective Test

A VAT-registered sole trader provides a company car to an employee and pays for all fuel, including fuel for private use. The business reclaims all input VAT on the fuel purchased. How is the private use of the fuel accounted for on the VAT return?

When a business recovers all the input VAT on fuel that is used for both business and private motoring, it must account for the private use. The standard administrative method is to add a VAT fuel scale charge (based on the car's CO2 emissions) to the output tax on the VAT return. This effectively acts as a deemed supply of the fuel for private use.