Section 192, Schedule 38: Valuation of Certain Supplies of Fuel
Summary
1.Section 192 introduces Schedule 38 which updates UK VAT law on how the use of business road fuel for private journeys should be taxed. It brings two concessions into law and brings UK law clearly within its European vires. It imposes no additional burdens on taxpayers in doing so and preserves all options previously available to taxpayers. The section establishes an option for taxpayers to account for VAT on the private use of road fuel on a flat rate basis and provides for a table of charges for private use of road fuel, similar to the one that is currently set out in section 57 of the Value Added Tax Act 1994 (VATA), to be set out to this purpose. It takes the annual revalorisation of that table to take account of changes in pump prices of road fuel out of the Budget process. Instead HM Revenue & Customs (HMRC) will be required to update the table in the future, outside of the Budget process and to a formula set out in a Treasury Order approved by Parliament.
Details of the Schedule
2.Paragraph 2 amends Schedule 6 VATA (valuation: special cases) by inserting a new Part 1 to that Schedule which provides an optional flat rate scheme for valuing deemed supplies which arise when a business’s road fuel is used in private journeys for no consideration.
3.New paragraph A1 sets out the conditions to determine when a deemed supply (for no consideration) of road fuel, which arises by virtue of paragraph 5(1) of Schedule 4 VATA, may be valued on a flat-rate basis. The supply must have arisen in circumstances where an individual uses road fuel, which the taxable person has acquired as a business asset, for private journeys. The taxable person may opt for all such supplies made to be valued under the flat rate scheme. If the taxable person opts to use the flat rate scheme for such deemed supplies all such supplies to all individuals in the relevant prescribed accounting period are to be valued on the flat-rate basis.
4.New paragraph B1 requires HM Treasury to make provision for the valuation of supplies on a flat-rate basis and to set out in an order a base valuation table which determines how supplies are to be valued. It enables HM Treasury to set out detailed rules on how the table is to be interpreted. An order under this provision must also require the Commissioners of HMRC to regularly revalorise the amounts in the base table so as to reflect changes in road fuel prices and to set out the revalorised figures in an updated valuation table which must be published by HMRC. The updated valuation table must be published before it takes effect together with a statement specifying the date from which the table has effect.
5.New paragraph C1 preserves a number of necessary rules and definitions that are currently in sections 56 and 57 VATA and brings them into Schedule 6. These stipulate which cars fall within the flat rate scheme, set out what happens if an employee drives more than one car or one car is driven by several employees and define “employment”, “car” and “road fuel”. This paragraph also provides a power for HM Treasury to amend the definition of road fuel.
6.Part 2 places all of the previously enacted paragraphs of Schedule 6 VATA under a new Part of that Schedule and a new heading. This does not change any of those paragraphs or how they should be construed.
7.Paragraph 3 provides for an exception to the standard rule for valuing deemed supplies so that, where a taxable person has opted to use the flat rate scheme for deemed supplies of road fuel, the standard valuation rule does not apply.
8.Paragraph 4 repeals sections 56 and 57 VATA.
9.Paragraph 5 amends section 97 VATA so that any order made under new Part 1 of Schedule 6 is subject to affirmative resolution procedures.
10.Paragraph 6 inserts a new paragraph 2A into Part 2 of Schedule 6. This is an anti-avoidance provision and replaces a previous anti-avoidance rule which appeared in section 56(2). It prevents under-taxation of private use of fuel by the charging of an artificially low consideration by a taxable person to his employee. It automatically values any supply for consideration made by a taxable person to an employee or partner, or another connected person, which is charged at less than an open market value (OMV), at the OMV.
11.Paragraph 7(1) sets out that the new flat-rate scheme will come into force on 1 February 2014. Paragraph 7(2) amends section 56(2) VATA with effect from 11 December 2013 to ensure that there is only one anti-avoidance rule in force.
12.Paragraph 8 provides for the new anti-avoidance rule in new paragraph 2A of Schedule 6 VATA to be treated as coming into force on 11 December 2012 and has effect for any supplies of road fuel made between 11 December 2012 and Royal Assent to the Finance Act 2013, that were at made at less than the OMV, but only to the extent that the fuel supplied has not been made available to the person receiving the supply before Royal Assent.
Background
13.This section achieves four objectives. These are (a) to bring two concessions into law, (b) to amend the current legislation so that it is compatible with EU law, (c) to streamline how the law is set out to aid small business’s understanding; and, (d) to simplify how the valuation tables are updated over time.
14.The changes made preserve all of the options for dealing with private use of business road fuel that are currently available. These are: (a) to treat all road fuel purchased as a business asset and declare scale charges to account for private use under the optional flat rate scheme; (b) keep accurate records of mileage split between business and private journeys (such records can be used to either apportion fuel purchases so that only fuel for business journeys is counted as a business asset, or to accurately value deemed supplies of fuel); and, (c) not to treat road fuel as a business asset, in which case no deemed supplies can arise. HMRC will provide improved guidance for taxpayers so that they may choose the option that best suits them with the minimum of compliance cost in doing so.
