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HMRC internal manual

VAT Fuel and Power

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HM Revenue & Customs
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Scope of the reduced rate: general

What goods are covered by the reduced rate?

The reduced rate applies to supplies of fuel and power listed under VAT Act 1994, Schedule 7A, Group 1.

This covers a wide range of fuels used within homes.

Matches

Supplies of matches are not for qualifying use in any circumstances and cannot be reduced-rated. The deeming provisions (VFUP2310) and 60% rule (VFUP2500) do not apply to such supplies. The VAT Act 1994 (Schedule 7A, Group 1, Note 1(1)) reads as follows:

1(1) Item 1(a) shall be deemed to include combustible materials put up for sale for kindling fires but shall not include matches.

Road fuel

Supplies of any gas or oil products to be used as road fuel are not for qualifying use in any circumstances and cannot be reduced-rated. VAT Act 1994 (Schedule 7A, Group 1, Notes 1(2) and 1(3)) refer. The deeming provisions (VFUP2310) and 60% rule (VFUP2500) do not apply to such supplies, nor are they subject to Climate Change Levy (CCL) - see VFUP5000.

For an explanation of the exceptions in Notes 1(3)(a) and 1(3)(b) see VFUP4000.

A growing number of cars are becoming capable of running on gas. These cars often have a dual-fuel capability, retaining the ability to use petrol or diesel.

Usually the fuel is bought at filling stations in the normal way, but a few owners have had homefill facilities installed in their private garage. This enables the owner to use natural gas to refill the fuel tank overnight at home. A separate meter situated in the garage will indicate the quantity of fuel used for this purpose.

Where gas piped directly to a customer’s home is used partially to fuel a car and partially for domestic purposes, the supply should be apportioned accordingly.

The gas is also liable for excise duty. VAT is due on the duty-inclusive value. In this situation, it is the homeowner who is responsible for accounting for the excise duty. There is more information about this in VAT Notice 76: Excise duty on gas for use as fuel in road vehicles.