There are many unseen costs for small businesses in buying fuel, but fuel cards can reduce administration and time spent on expense and VAT reclaim, while providing control, convenience and financial benefits too.
Controlling fuel purchases and putting in place accurate claims processes, while ensuring that VAT reclamation is efficient and error-free, are issues many small and medium-sized 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, whether you are a large corporate, or small business.
Crucially, what they also do is make sure you can claim every penny of VAT owed to you in a timely and cost-effective way, by automatically supplying HMRC-compliant invoices.
What is a VAT receipt?
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
Claiming VAT back: what’s at stake
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.
How large? Even for a small business the numbers can be quite surprising. Take this example…
It’s essential that every receipt is kept, even in a small business fleet. Look at the job to be done on a fleet of 20 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 20-vehicle fleet, that’s potentially 1,000 pieces of paper to manage, collate and reclaim in a year – a lot for a business that probably doesn’t have a full-time fleet manager. But imagine if 20% 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 200 lost receipts totalling £18,000, of which - and are you sitting down? - £3,600 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.
Admin time: the unseen cost
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 at a cost to you to get their admin done. For 20 drivers, reclaiming the fuel could cost the business nearly £2,000 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 20 drivers means a remarkable 40 hours annually spent on fuel expense claims by somebody in the business. At the same hourly rate (£15), that’s another £600 in salary spent on fuel admin. And if they’re paid £20 per hour, that’s £800 worth of time they could be doing something else, such as invoice-chasing to help your cashflow. Time is money as they say.
In total, that small business could be spending nearly £3,000 a year on wages to manage fuel claims (to keep it simple, we’ve only factored in hourly rates, not NI and other costs).
Don’t forget that these costs are on top of the £3,600 of VAT not claimed back it may be entitled to due to lost receipts. 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.
20 vehicles
1000 receipts
£2000 in time for drivers making the claim
£600 in admin processing the claim
£3600 of VAT lost if 20% of receipts are lost
Solution: a fuel card
Is the process different for electric vehicles?
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 Chargepass card and Allstar Homecharge could help, by potentially making it easier to understand and administer. You can find more about that here.
The convenient way to find fuel, or chargers
While fuel cards could save admin time, they may also provide convenience for the driver too, saving time spent looking for fuel stations or electric chargers during work time.
Allstar’s electric charging payment network is the largest and fastest in the UK with more than 59,000 charge points; while Allstar’s fuel sites cover 90% of the country, including major oil brands and supermarkets. So whether you or your drivers need petrol, diesel or electric, there should be an Allstar-accepting site nearby.
Cardholders could also benefit from our newly updated Co-Pilot app which works with Google Maps so drivers can plan their route across the UK’s largest combined fuel and EV charging network.
The solution: buying fuel better and streamlining admin
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, are accessible at a time and place that suits you, 24/7.
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 spending 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 a system to prevent receipts getting lost, it’s clear to see why using fuel cards can save small businesses’ time and money in many different ways.
Stay tuned with Allstar for more tips on maximising your business efficiency and savings!
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