If a business pays for road fuel for a car used by an employee for both business and private mileage, and does not charge the employee for the private use, how is this treated for VAT?

Answer options:

No input VAT can be recovered

Input VAT is apportioned based on business mileage

Full input VAT recovered but output VAT accounted for via fuel scale charge

Full input VAT recovered with no output VAT adjustment

How to approach this question

Identify the standard HMRC method for dealing with private fuel provided by an employer: claim all input tax, but offset the private element by paying output tax via a fixed scale charge.

Full Answer

C.Full input VAT recovered but output VAT accounted for via fuel scale charge✓ Correct

When a business provides fuel for private use and does not charge the employee, it can recover all the input VAT on the fuel purchases. However, it must account for output VAT using the appropriate fuel scale charge (based on the car's CO2 emissions) to cover the private use element.

Common mistakes

Thinking input VAT must be strictly apportioned based on mileage logs.

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Practice the full ACCA TX — Taxation Practice Exam 6

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