What is a fuel scale charge?

A fuel scale charge refers to the output VAT charge that a business must account for to offset the input VAT that has been reclaimed on fuel purchased, specifically when that fuel is also used for private purposes. This mechanism is important for businesses that provide fuel for their employees or for mixed-use vehicles, where not all fuel consumption is strictly for business activities.

When a business reclaims VAT on fuel, it must effectively recognize that some of this fuel is used for non-business purposes. The fuel scale charge ensures that the appropriate amount of output VAT is paid back to HMRC based on the proportion of fuel used privately. This helps maintain the integrity of the VAT system, ensuring that the business does not benefit from reclaiming VAT on fuel that hasn’t been entirely used for business activities.

In contrast, other options suggest different interpretations of charges associated with fuel but do not accurately describe the process and implications relating to output VAT and private fuel use. Therefore, the definition and function of the fuel scale charge as stated aligns perfectly with its purpose within the VAT system.