Controlling fuel purchases and putting in place accurate claims processes, while ensuring that VAT reclamation is efficient and error-free, are issues many businesses face.
But with fuel cards, you can help resolve these problems.
Fuel cards can offer access to cheaper fuel, while recording purchases. As a result they provide control, offer convenience, and vital fleet management information too.
Crucially, what they also do is make sure you can claim every penny of VAT owed to you to in a timely and cost-effective way, by automatically supplying HMRC-compliant invoices.
Firstly, it’s worth knowing what needs to be on a VAT receipt for it to be HMRC-compliant. As we’re talking about fuel, it’s not the same amount of information as a full invoice, as it’s part of what’s called a ‘simplified’ version for supply of goods under £250. So it needs to include:
The seller’s name and address
The seller’s VAT registration number
The date of supply (tax point)
A description of the goods or services supplied
In order to reclaim the right amount of VAT, drivers will need to keep accurate records. VAT-registered companies can reclaim all the VAT on fuel if the vehicle is used only for business, and it’s important to do so because the amounts that can be reclaimed are large, as 20% standard rate VAT is applied to fuel.
How large? Say a van driver has done 20,000 business miles a year, buying diesel at an average of 150p per litre, at 30mpg. That’s a cost of £4,546, of which 20%, or £909, is reclaimable VAT. Not surprisingly, once that gets extrapolated over a fleet of 10, 100 or 1,000 vehicles, it’s a huge amount of VAT that could be recovered.
It’s absolutely essential that every receipt is kept. Look at the job to be done on a fleet of 100 vehicles. A van doing 20,000 miles a year at 30 mpg uses 3,000 litres of fuel, and has a fuel tank capacity of 60 litres, so has to make 50 stops at the pump annually. And the driver needs to keep the accompanying 50 receipts, and submit them too.
Over this 100-vehicle fleet, that’s potentially 5,000 bits of paper to manage in a year. But imagine if just 10% of them never see the light of day again, lost down door bins, chucked away by accident, left in wallets or eaten by the dog.
On average, each fill up in this example costs around £90. So 500 lost receipts total £45,000, of which - and are you sitting down? - £9,000 is potential VAT your business may never be able to reclaim…
This is just one simple example of the hit a business may take with unreclaimed VAT, let alone the huge amount of admin needed to keep up with it all. It pays to ensure that every receipt is captured. This is where fuel cards could come in.
We’ve shown the effort required to get, and then keep hold of receipts, and what can happen when you don’t, in our fictional fleet. But what about the other costs involved in this pay and reclaim process?
It would not be unusual for it to take each driver 30 minutes a month to fill out the expense form for their business fuel costs. If they’re paid £15 an hour, and do their admin in work time, that’s six paid hours a year, or £90 it’s cost you to get their admin done. For 100 drivers, reclaiming the fuel could cost the business £9,000 in wages.
But don’t forget the admin for approving the expenses and getting it all submitted to HMRC, and then paid back too.
Let’s call it 10 minutes per claim (things are going very smoothly in the finance department!). Twelve claims per driver per year and 100 drivers means a remarkable 200 hours spent on fuel expense claims in the admin department. Perhaps they’re paid the same as the drivers - £15 an hour. £3,000 spent managing the claims.
In total, that business could be spending £12,000 a year on wages managing fuel claims. Don’t forget it’s also potentially not managing to claim back nearly £9,000 of VAT it may be entitled to. And that’s without even factoring in the issues of false claims, exaggerated mileage, or overly expensive fuel when cheaper options may be available nearby.
Yes, and no. With EVs, electricity bought through public chargers has VAT charged at 20%, while for those plugging in at home, it is only 5%. You can still reclaim this on business mileage, as long as you keep all the receipts (paper or digital) and know what electricity domestically powered those mileage too.
For this, you might need a whole different system, and that’s where the Allstar One Electric card and Allstar Homecharge could help, by potentially making it easy to understand and administer. You can find more about that here.
While fuel cards could save admin time, they may also provide convenience for the driver too, saving working time spent looking for fuel stations or electric chargers. Allstar’s fuel card network is the largest in the UK, with sites covering 90% of the UK and more than 12,000 charge points, meaning drives should not have to travel far to fill up.
They could also benefit from our newly updated Co-Pilot app which can show where fuel sites or chargers are on the network.
Our imaginary fleet above might not be entirely the same as yours, but you probably will recognise some similarities when it comes to keeping and collating receipts, and admin time.
With Allstar fuels cards, and our online portal, receipts are managed and controlled efficiently in one place and with 24/7 access, are accessible at a time and place that suits you.
Digital, automatically created HMRC-compliant invoices ensure lost receipts are a thing of the past, where permitted VAT could be recovered, and business mileage can be recorded.
Then, simple online authorisation processes massively cut down on admin time and costs too. Added to this is the convenience of thousands of outlets nationwide for filling up or plugging in, that help ensure drivers get on with working, rather than wasting time looking for somewhere to stop.
When you look at productivity and hidden costs, as well as the flat cost of fuel and the potential loss of unreclaimable VAT when not using them if receipts get lost, it’s clear to see why using fuel cards can save businesses’ time and money in many different ways.