The Value Added Tax (Consideration for Fuel Provided for Private Use) Order 2011

EXPLANATORY NOTE

(This note is not part of the Order)

This Order amends section 57 of the Value Added Tax Act 1994 (c.23) (“the Act”). References to sections 56 and 57 are references to sections 56 and 57 of the Act.

VAT is payable if road fuel of a business is used for private motoring. Section 56 provides that where the fuel of a business is provided for private use it is to be treated as a taxable supply for consideration. The value of that supply is determined in accordance with the provisions of section 57. Where a CO₂ emissions figure is available for the vehicle involved in private use, Table A in section 57 (“Table A”) stipulates a flat rate value for the fuel determined by reference to that CO₂ emissions figure. Where no emissions value is available, note (6) in section 57(3) attributes a CO₂ emissions figure to the vehicle according to its cylinder capacity for the purpose of applying Table A.

This Order substitutes a new Table A and amends note (6)(c). The substituted Table A increases the flat rates and amends the highest category of CO₂ rating in the Table. Note (6)(c) is amended to reflect the change to the highest category of CO₂ rating in the Table. The new rates apply to prescribed accounting periods starting on or after 1st May 2011.

Council Decision 659/2006/EC of 25th September 2006 (OJ No. L272/15, 3.10.2006, p.15) (“the Decision”) permits the UK to derogate from Articles 5(6) and 11(A)(1)(b) of Council Directive 77/388/EEC (OJ No. L145, 13.6.1977), now recast as Articles 26 and 75 of Council Directive 2006/112/EC (OJ No. L347, 11.12.2006) (“the Directive”). The Directive requires the value of a supply of business goods for private use to be determined by reference to their purchase price or cost price. The Decision authorises the United Kingdom to value the supply of business fuel for private use by using a flat rate which is dependant on a vehicle’s CO₂ emission rating. The derogation requires that the flat rate amounts must be adjusted annually to reflect changes in the average cost of fuel.

In line with government commitments, a Tax Information and Impact Note has not been prepared for this instrument as it gives effect to previously announced policy and relates to routine changes to rates to a predetermined indexation formula.