Regan Brown
The rate of VAT on domestic fuel depends on the type of fuel and the quantity. For example, the standard rate of VAT on fuel and power is 20%, but there is a reduced rate of 5% for domestic heating fuel. This reduced rate applies to supplies of fuel and power for 'qualifying use', which includes fuel and power for domestic use, non-business use by charities, and fuel and power that does not exceed the 'de minimis' limits. For commercial properties, the VAT on heating oil or gas oil is charged at 5% for orders up to 2,300 litres, and 20% for orders exceeding this amount.
| Characteristics | Values |
|---|---|
| Flat rate for VAT on fuel | 20% |
| Reduced rate for domestic heating fuel | 5% |
| Qualifying use for reduced VAT rate | Fuel and power for domestic use, charity non-business use, and small quantities of fuel and power |
| Examples of qualifying residential accommodation | Care homes for the elderly or disabled, hospices, student accommodation, and homes for people with past or present dependence on alcohol, drugs, or mental disorders |
| Commercial VAT rate for heating oil or gas oil | 5% for orders up to 2,300 litres, 20% for orders over 2,300 litres |
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What You'll Learn
Reduced VAT rate for domestic fuel
Supplies of fuel and power are generally subject to the standard rate of VAT. However, the reduced VAT rate of 5% can be applied to certain types of fuel and power under specific conditions.
Qualifying Use
The reduced VAT rate applies to the supply of fuel and power for "qualifying use". This includes fuel and power for domestic use, non-business use by charities, and certain types of residential accommodation.
Domestic Use
For fuel and power to qualify as domestic use, they must be supplied to a dwelling or specific types of residential accommodation. This includes homes providing care for the elderly, disabled individuals, or people with past or present dependence on substances or mental health disorders. Subsidiary buildings located a short distance away, such as garages or blocks located separately from a house, are also considered part of the same residential unit.
Non-Business Use by Charities
The reduced VAT rate also applies when fuel and power are supplied to charities for non-business activities. If 60% or more of the fuel or power is supplied for non-business use, the charity can pay the reduced rate on the entire supply. If less than 60% is for non-business use, VAT will be charged pro-rata, with the reduced rate applied only to the portion used for non-business activities.
Residential Accommodation
Relevant residential buildings that qualify for the reduced VAT rate include care homes, hospices, and student accommodation.
Quantity Limitations
It's important to note that the reduced VAT rate is typically applied to small quantities of fuel and power. For electricity, this is limited to no more than 1,000 kilowatt-hours per month, and for piped gas, it is limited to no more than 150 therms per month.
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VAT on fuel for business use
The amount of VAT you can reclaim on fuel for business use depends on the type of vehicle and the mileage allowance. You can reclaim VAT on fuel used for business purposes without keeping detailed mileage records by using the VAT fuel scale charge. This method determines how much VAT you must pay on fuel if you use a business car for private purposes. The VAT fuel scale charge takes into account your car's CO2 emissions figure, which can be found in your vehicle logbook or requested from the DVLA.
For new cars, you can reclaim all the VAT as long as you can prove the vehicle is used for business only. This includes taxis, driving instructors, and personal chauffeurs. For leased cars, you can typically reclaim 50% of the VAT on fuel, but you may be able to reclaim the entire amount if you can prove exclusive business use. If you hire a car for business purposes for ten days or fewer, you can reclaim all the VAT. For commercial vehicles, you can reclaim VAT on vans, lorries, or tractors.
VAT on fuel expenses is deductible from your taxes based on the percentage of the car's use for business trips. To claim 100% of the VAT, you must demonstrate that all the fuel is for business purposes only, which can be challenging unless you work in industries such as taxi services or lorry haulage. Alternatively, you can keep a detailed mileage log to calculate the VAT reclaim for business mileage. This method may be more suitable for sole traders or small businesses.
It's important to note that you cannot reclaim VAT on fuel used for private purposes, even when using a company car. Additionally, VAT incurred by landlords on residential accommodation provided to tenants is not recoverable. However, if a local authority supplies gas or electricity to previously owned accommodation, it is considered a business activity, and VAT is charged at the reduced rate.
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VAT on fuel for charity use
In the UK, the standard rate of VAT on fuel is 20%. However, charities may be eligible for a reduced rate of 5% on fuel and power for non-business use. This includes fuel and power for residential accommodation, such as children's homes or care homes for the elderly, as well as charitable activities like free daycare for disabled people. To qualify for the reduced rate, at least 60% of the fuel or power supplied to the charity must be for non-business activities. If less than 60% is for non-business use, VAT will be charged pro-rata, with the reduced rate applied to the non-business portion and the standard rate applied to the business portion.
Charities can also benefit from the reduced VAT rate on small-scale fuel use, up to 1,000 kilowatt-hours of electricity per month or a delivery of 2,300 litres of gas oil. This reduced rate also applies to residential dwellings and certain types of residential accommodation, such as homes providing care for the elderly, disabled people, or those with past or present mental disorders.
It's important to note that vehicle fuel is not included in the qualifying fuel and power for charities. Additionally, if a charity carries out both business and non-business activities on the same premises, the fuel supply may need to be apportioned accordingly between qualifying and non-qualifying use. In such cases, a certificate may be required to support the application of the reduced rate based on charitable non-business use.
Certain medical gases, such as anaesthetics and oxygen, may be zero-rated or exempt from VAT for charities. However, supplies of gases for use as road fuel are always standard-rated and subject to VAT.
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VAT on fuel for commercial properties
Supplies of fuel and power are usually subject to the standard rate of VAT, which is 20%. However, there are certain cases where the reduced rate of 5% VAT may apply. This includes fuel and power for qualifying use, such as domestic use, charity non-business use, and small quantities known as de minimis limits.
For commercial properties, the standard rate of 20% VAT typically applies to fuel and power supplies. However, there may be instances where the reduced rate of 5% VAT can be obtained for certain "qualifying uses". For example, fuel and power supplied to NHS organisations for use in hospitals and offices are subject to the standard rate of 20% VAT. However, when provided for specific purposes, such as care homes, student accommodation, or staff accommodation, the reduced rate of 5% may be applicable.
Businesses can reclaim VAT on fuel expenses, including road fuel used for business miles or in company cars. To claim 100% of the VAT, it must be proven that the fuel is solely for business use. This can be challenging unless the business operates in taxi services or lorry haulage. Alternatively, businesses can keep detailed mileage logs to calculate and claim the VAT applicable to their fuel usage.
Commercial vehicles, such as vans, lorries, tractors, motorcycles, motorhomes, caravans, and certain types of vans with rear seats, are eligible for VAT reclaim on fuel. Additionally, car leases may allow for a 50% VAT reclaim, but proving exclusive business use can increase this to 100%. Short-term rentals of up to 10 days, solely for business purposes, also qualify for full VAT reclaim.
It is important to note that the rules and rates of VAT on fuel for commercial properties may vary based on location and specific circumstances. Businesses should consult official government sources and seek professional advice to ensure accurate VAT compliance and reclaim procedures.
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VAT on fuel for domestic heating
Supplies of fuel and power are generally subject to the standard rate of VAT. However, the reduced rate of VAT, which is 5%, applies to supplies of fuel and power for qualifying use. This includes fuel and power for domestic use, fuel and power for charity non-business use, and fuel and power that does not exceed the small quantities called the de minimis limits.
For heating oil or gas oil (red diesel), the VAT rate is 5% for orders of up to 2,300 litres for commercial properties. For orders exceeding 2,300 litres, the VAT rate increases to 20%.
When it comes to domestic heating fuel, the VAT rate is typically reduced to 5%. This reduced rate applies to quantities of greater than 2,300 litres, provided that the supply is for a domestic dwelling or specific types of residential accommodation. Examples of eligible residential accommodation include care homes for the elderly or disabled, hospices, and student accommodation.
It is important to note that the provider must ensure that the supply is indeed for domestic or eligible residential use to qualify for the reduced VAT rate. If the reduced rate is applied incorrectly, suppliers may be liable for any undercharged VAT.
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Frequently asked questions
The VAT rate on domestic fuel in the UK is typically 5% for domestic heating fuel. However, for commercial properties, the VAT rate is 5% for orders up to 2,300 litres and 20% for orders exceeding 2,300 litres.
Businesses can reclaim VAT on fuel to save money. The amount of VAT that can be claimed depends on the percentage of the car's use for business purposes. To claim 100% of the VAT on fuel, the fuel must be used solely for business trips. Alternatively, businesses can keep a detailed mileage log to calculate the VAT deduction based on the percentage of business usage.
The standard VAT rate on fuel in the UK is 20%. However, certain types of fuel, such as domestic heating fuel, may qualify for a reduced VAT rate of 5%.
