EU Shadow cast over UK fuel payments

FEW fleets know that much of the legislative changes that affect them now originate in Europe as Britain becomes more closely linked with the European Union. The latest piece of legislation shows how important it is to take notice of the changes that are being made.

Last week, fleets were warned of the full impact of a European row over fuel and VAT that has been ongoing for years.

Put simply, the European Sixth Directive wants to ensure that if companies are going to reclaim VAT on fuel purchases, that purchase was made by a VAT-registered company.

Therefore, if an individual purchases the fuel using a private card or cash, then the employer cannot reclaim VAT. Estimates vary, but a worst-case scenario puts the cost of the industry at £1.2 billion.

The ruling affects a wide variety of transactions, but one of the most wide-ranging is pay and reclaim, where a driver buys a tank of fuel and then claims back the cost, or simply claims back mileage at a set pence per mile rate. In both cases, this will be considered a private transaction and under the Directive, a company will not be able to reclaim VAT.

Allen Fleet Services believes that the decision will have significant financial implications for UK businesses.