HMRC Contravenes EU Law

TaxationWeb reports that HMRC has admitted that its approach to charging business VAT on some of the private fuel made available for private use contravenes EU law, and that the rules need to be changed.

In the absence of detailed mileage records to derive an accurate apportionment, HMRC has required businesses to account for VAT at least to the extent of the Road Fuel Scale Charge (even where the business has made a smaller charge for the fuel made available for private use).

This means that some businesses will have been required to pay more VAT to HMRC than the element that would correspond to their actual charge for private use.

As HMRC now admits, this contravenes the Principal VAT Directive.

In a Technical Note ( VAT: Road Fuel Scale Charges - Changing UK Law to Comply with EU Law and Streamlining the Scheme ) they confirmed:

"A deemed supply cannot be imposed where consideration is paid

Under the provisions of the PVD, where a real supply exists no deemed supply can be imposed. Consequently, UK law is wrong to impose RFSCs where a taxpayer makes a real charge for road fuel but that charge is less than cost price."

Those businesses affected by this can make a claim against HMRC going back up to 4 years.


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