The change comes into effect
from 1 January 2006 regardless of the VAT return
period end date. From that date, employers should
retain VAT invoices, including less detailed garage
VAT invoices their employees obtain from the fuel
supplier as proof of purchase.
Customs acknowledge that businesses
will need a little time to make the necessary changes
to their arrangements in order to hold VAT invoices
in support of their claims. Therefore, Customs will
be administering the change with a ‘light
touch’ until such time as businesses have
had a reasonable period to adjust to the new requirement.
As with the existing system,
input tax may only be claimed on the cost of fuel
for business use. As such, invoices only need to
cover this amount.
Customs accept that the amount
of the invoice in many cases will not match the
input tax claim in respect of business fuel in any
one claim period and that invoices may cover more
than one period, particularly where fuel is purchased
towards the end of a period.
Clearly, a claim cannot be supported
by a VAT invoice which is dated after the dates
covered by the claim. This means, in practice, that
it may be advisable for employers to arrange for
their employees who use, or may use, their cars
for business purposes to retain all fuel invoices.
This will ensure that, at the end of the claim period,
the value of business fuel is covered by an invoice.
The fuel prices per mile rates
used to determine the business fuel cost remain
unaffected. Customs publish their own rates but
also accept rates set by recognised motoring agencies,
eg RAC, AA etc.
The only practical change to
the current system is that an invoice must be retained
in support of a claim for VAT recovery - in the
vast majority of cases, this will be a less detailed