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HMRC internal manual

VAT Input Tax

Motoring expenses: private use of commercial vehicles

The private use provisions need not be applied if the private use of a commercial vehicle is:

  • on a small scale; and
  • incidental to the main use of the vehicle.

Imagine a sole proprietor has a car and a van. For the security of the vehicle and its contents the proprietor has to return the van to their private residence overnight. If this happens, the private use provisions would not apply.

If a business has only commercial vehicles it is more likely that they will be used for private motoring. In these cases it is reasonable for the business to reflect any private use of fuel in its VAT calculations.

The Motor Agents’ Association (MAA) has explained to HMRC the method adopted by many car dealers when they appropriate or supply a car, and free road fuel, to owners and employees. They often use any car which is available. In the course of a year they may use a high number of different cars for their private motoring.

Scale charges are part of a simplification package. So to ensure that the correct scale is being used it would be unreasonable to expect car dealers to keep records of all cars used.

It has been agreed with the MAA that HMRC will discuss with the business which scale each individual should be placed in. The scale is to be based on a typical car that each person might use. This will often depend on the types of vehicle that the business deals in.

For example, if a business only deals in cars with a CO2 emissions figure of over 200, and the employees use these cars, they should be placed in the appropriate band for cars of this emission band. The same principle would apply in cases where a business deals only with cars with emission figures below 140.

When cars of varying emissions are used it is suggested that an average banding is applied unless certain individuals consistently use cars properly belonging in a specific band.