The VAT law in Ireland does not allow for a VAT refund on diesel or gasoline. The VAT input deductibility entitlement of VAT registered taxpayers is affected by the varied treatment of VAT on gasoline and diesel.
Businesses that make VAT-charged supplies are eligible to claim input VAT on their operating expenditures.
As with other business expenses, VAT-registered individuals are eligible to claim the cost of VAT on the purchase of diesel used in the course of their business.
However, section 60 of the VAT Consolidation Act 2010 prevents businesses from deducting VAT on some items and services that are difficult to distinguish from ordinary non-business use due to their pervasive character.
This is due to anti-avoidance concerns.
Even if the petrol or other goods and services are obtained or used for the purpose of a taxable business, they are specifically excluded from deductibility entitlement.
Ireland can keep certain restrictions on VAT deductibility that were in effect before 1979 under Article 176 of the EU VAT Directive. Because VAT input deductibility on gasoline has been limited since 1972, Ireland can keep that restriction in place. While it is permissible to apply the standard rules of VAT deductibility to gasoline, it will be impossible to do so until the block on deductibility is loosened or removed. Because there are more diesel-powered personal motor cars on the road today than in the past, there is a rationale for treating them equally in terms of input deductibility entitlements. Article 176, on the other hand, prohibits the imposition of a new deductibility restriction on diesel expenses. The restriction on VAT deductibility remains in effect as long as anti-avoidance concerns about deductibility of gasoline expenses persist.
A Low Emissions Vehicle Taskforce has been established in response to a commitment made in the Programme for Partnership Government, and it is looking into a variety of possibilities to encourage the use of low-emission vehicles, one of which is the possibility of a VAT refund on gasoline.
The group’s work is still underway at this time.
How much VAT can you claim back on diesel?
We’ve compiled a list of four methods businesses can recover VAT on fuel and gasoline expenses for business trips in this blog, so you can pick the one that works best for you or watch this fast explanatory video.
According to HMRC, you can reclaim 100% of the value added tax you spent on fuel used for business reasons. You must, however, be able to show that the fuel was utilized solely for work purposes and that no personal trips were conducted. Unless you own a cab company or a driving school, this is nearly impossible.
If you pay a VAT fuel scale fee, you can reclaim 100% of the VAT on business gasoline. It’s a straightforward method of charging private-use fuel. If a vehicle is used for both business and pleasure, you can claim VAT on business trips if you pay the proper fuel scale fee. The fee is calculated based on CO2 emissions and the kind of vehicle used. In some circumstances, if mileage claim rates are low, claiming the VAT back may be more expensive.
Companies forget to pay the fuel scale fee or update the amounts when the fuel scale charge increases every year, making this VAT refund method one of the easiest for HMRC auditors to examine and catch finance teams on.
The third method is to keep a complete mileage claim journal and claim the VAT on the business portion of any fuel purchased. Then you perform the math to figure out how much VAT you can recover on that purchase. Alternatively, you can use HMRC’s advised fuel rates, which were released on December 1, 2017.
This is listed as an option in HMRC’s handbook, but if you choose to claim no VAT, you must apply it to all of your business’s cars, including commercial vehicles, which means you won’t be able to claim VAT on mileage travelled in the company delivery van.
It’s possible to collect unclaimed VAT on fuel used for business trips for up to four years if you save your fuel receipts or other appropriate evidence. Similarly, HMRC might demand receipts dating back four years to verify you can back up your VAT reclaims.
Making a VAT claim on fuel consumed by your firm and employees can help you save money – but getting it wrong can cost you. It’s probably preferable to employ an outsourced, compliant solution because, when done correctly, it can help you save money while still keeping the taxman happy.
Can you claim back VAT on fuel?
If you do not pay a set rate under the Flat Rate Scheme, you can claim VAT on fuel in a variety of ways.
If your car is solely used for business, you can claim 100% of the VAT on fuel. If you use the car for both business and personal purposes, you have three options for handling VAT. You can do the following:
- Only claim VAT on fuel used for business trips – accurate mileage records are required.
- If your business mileage is so low that the fuel scale charge would be larger than the VAT you may reclaim, you can choose not to reclaim any VAT.
What can you claim VAT back on Ireland?
How much VAT can you claim? You can reclaim the VAT you paid on qualified automobiles and other items and services used in your taxable supplies. To substantiate your claim, you must provide a valid VAT invoice or applicable Customs receipt. To back up your claim, you’ll need to keep records.
What is the VAT on diesel in Ireland?
Fuel (coal, heating oil, gas), electricity, vet fees, building and building services, agricultural contracting services, short-term automobile rental, cleaning and maintenance services all have a lower rate of VAT of 13.5 percent.
Do you pay VAT on diesel?
The cost of petrol, diesel, and other fuels used in automobiles or for heating includes fuel duty. You must also pay 20% standard rate VAT on most fuels or 5% reduced rate VAT on residential heating fuel.
Is fuel exempt from VAT?
A large number of basic foods, as well as diesel, petrol, and illuminating paraffin, are zero-rated rather than exempt. This means that the client does not have to pay VAT, but the supplier can claim input VAT if they are VAT registered because they are making VATable supplies (albeit at a rate of zero). Exports are likewise exempt from taxation.
The transaction is zero rated if a business is sold as a going concern by a VAT registered vendor to another VAT registered vendor along with the assets required for the business to continue as a going concern and a number of conditions are met. It is vital that the contract of sale be drawn up by someone who is thoroughly conversant with the requirements to qualify as zero rated, such as Harbour and Associates.
Most fee-based financial services are subject to VAT, thus claimable VAT will be added to your bank charges, for example.
How do you work out VAT on fuel?
We now have a clear understanding of the mileage claim and how to obtain the fuel recommendation rate. So, how do we figure out how much VAT we have to pay on mileage claims?
Step 1: Multiply the fuel recommendation rate by the number of claimed business miles. This gives us the overall amount of fuel used.
Step 2: Multiply the entire amount of fuel by the VAT portion. Because the VAT rate is currently 20%, the VAT fraction is 20/120, which can be decreased to 1/6th.
n.b. Anyone who works with VAT on a regular basis is aware that step 2 entails calculating VAT on a gross sum.
What is a VAT fuel receipt?
The following assertion was made in a recent article about fuel receipts used to reclaim VAT:
Fuel receipts must include the VAT number as well as a breakdown of the VAT amount, and fuel must be purchased on the day of travel or within a reasonable time before.
We currently offer a 10-day time range for receipt dates.
What are other people’s perspectives?
Are we being a little too fair with that timeline?
Our claimants submit their claims using a mileage claim form at a set per-mile fee.