Tax cases

VAT on fuel

As expected following the advocate general's opinion given towards the end of 2004 (see 'Road fuel' Taxation 27 January 2005 page 392) the European Court of Justice has ruled that businesses can no longer reclaim the VAT on the cost of business fuel reimbursed to employees that is the fuel element paid in mileage allowances.
This means that the system used widely in the UK whereby businesses pay employees mileage expenses by means of a mileage rate will have to be revised. As Peter Jenkins global head of indirect tax at Ernst & Young says 'this is another example of bad rules overtaking good practices'. He said that the existing system works well but that in light of the decision companies will have to rethink the way that business mileage is dealt with or...