The government has changed the way VAT is applied on the road fuel scale charge.
For accounting periods starting on or from 01 May 2007, the scale charge will be based on the CO2 emissions of the vehicle.
These are rated in 5g/km bands.
This move brings the road fuel scale charge into line with other CO2 taxes on business car motoring.
The VAT fuel scale charges are used to account for the fuel used by company business car drivers during private mileage.
The previous system accounted for the VAT on engine size. The new system uses a business car’s CO2 emissions to calculate the rate.
For example, the quarterly output tax on a vehicle with 160g/km CO2 emissions is £34.40:
CO2 band of 160g/km on quarterly accounting period
- VAT fuel scale charge £231
- VAT charge £34.40
- VAT exclusive charge £196.60
The CO2 bands run from 140g/km and below (for example a Honda Civic 2.2 i-CTDi SE 5dr) with a quarterly VAT fuel scale charge of £182.
To 240g/km or above (for example a Land Rover Discovery 2.7 TDV6 XS) with a quarterly VAT fuel scale charge of £426.
The rating system is stepped in bands of 5g/km. Where the CO2 emissions are not a multiple of 5, the figure is rounded down to the next multiple of 5.
For example, a Honda CR-V diesel with emissions of 173g/km would be rounded down to the 170g/km band.
For a bi-fuel vehicle – such as a Saab BioPower model – the lower of the two CO2 figures should be used.
Further information
You read more about the change to the VAT fuel scale charges in our Business Car Manager Law & Tax section by clicking on the link here: www.businessmotoring.co.uk. VAT charge changes to CO2-based scheme