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HMRC internal manual

VAT Fuel and Power

From
HM Revenue & Customs
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Scope of the reduced rate: apportionment of supplies partly for qualifying use: general

Fuel is often supplied to customers who only use part of it for ‘qualifying use’ (see VFUP2200). For example, a publican who lives on the premises will usually receive a single bill covering both domestic use (see VFUP2300) and business use.

Suppliers should first consider whether the supply is deemed to be for domestic use (see VFUP2310). If it is, the supply is reduced-rated.

If the supply is not deemed to be for domestic use, suppliers then need to consider whether the fuel is to be used in domestic or residential accommodation (see VFUP2330), or is being used by a charity for a non-business purpose (see VFUP2400). In many cases this might seem obvious: for example, supplies to houses, flats and residential homes. But bear in mind that a house may be used entirely for business purposes (for example, a doctor’s surgery), and that residential homes may have non-residential areas (for example, office accommodation).

If the fuel supplied is not entirely for use in domestic accommodation or for use by a charity for a non-business use purpose, the proportion supplied for qualifying use must be determined. The VAT Act 1994 Schedule 7A Group 1 Note 4 reads as follows.

4 For the purposes of this Group, where there is a supply of goods partly for qualifying use and partly not-

(a) if at least 60 per cent. of the goods are supplied for qualifying use, the whole supply shall be treated as a supply for qualifying use; and

(b) in any other case, an apportionment shall be made to determine the extent to which the supply is a supply for qualifying use.