Revenue & Customs Brief 11/12

VAT: Road Fuel Scale Charges (RFSCS) - legislating VAT Extra Statutory Concessions (ESCS) and possible claims for overpaid VAT

1. Introduction

HM Revenue & Customs (HMRC) operates a system of Road Fuel Scale Charges (RFSCs) to help businesses account for VAT when business road fuel is put to private use. This is a simplification measure that allows businesses to use a standardised scale charge to value private use fuel. Otherwise businesses would need to keep other records such as detailed records of private mileage.

Following the announcement in the Budget that the Government would be consulting on amendments to the legislation on the RFSC, HMRC has issued a Technical Note on the planned changes, this is available by following the link below.

Technical note - VAT: Road Fuel Scale Charges - changing UK law to comply with EU law and streamlining the scheme

The changes to RFSC outlined in the Technical Note aim to maintain the overall benefits of the RFSC system. The changes will:

  • bring into legislation the effect of two existing extra statutory concessions
  • simplify the legislation and the process for the annual revalorisation of the scale charges
  • withdraw one extra statutory concession
  • correct a defect in the existing legislation

2. Who needs to read this?

VAT-registered businesses that use road fuel scale charge to account for VAT on fuel which has been acquired through their business but then used for private purposes.

3. Impact of the defect in existing RFSC legislation

Under existing law, where a business has provided fuel to an employee for their private use and has made a charge for that fuel, they are required to account for VAT on the basis of the RFSC, unless they have accounted for VAT on the basis of detailed records of private mileage or the charge made was at least for the cost of the fuel. HMRC now recognises that there is a defect in this aspect of current law and that, where the business does make a charge for the private use of the fuel, the business should be given the option of accounting for VAT on the basis of the amount charged to the employee.

Businesses making a charge for private use of fuel may, until the defect has been corrected, account for VAT on this basis in future returns. Any businesses who consider that they have overpaid VAT as a result of this defect may submit a claim for repayment of the difference between the amount already accounted for and the amount due on the basis of the charge to the employee. All claims which are submitted to HMRC must be supported by proper evidence and are subject to the normal rules for claims. Further guidance on making claims can be found in Public Notice 700/45 How to correct VAT errors and make adjustments or claims.

Issued 25 April 2012