The Partners of most firms have a company car provided for them and generally, they get their petrol expenses paid for them by the firm.
The firm can then claim the VAT back against their output VAT. H M Customs & Excise decided that a percentage of the petrol that the partners were being paid for would have been used for personal use and that the firm should not be allowed to claim back all of the VAT. They devised a scheme where, at the end of each VAT quarter, the firm has to make an adjustment to the VAT liability account and increase it by a set amount for each partner depending on the size of the engine of their company car. This is generally known as “Road Fuel Scale Charges”, although some firms may call it by a different name. This adjustment requires a special type of posting that has no effect on the office bank, increases the balance on the partners’ petrol expense nominal and also increases the VAT liability. It should be done as follows:
Go to Postings, Nominal and select Nominal Cash Cheque.
Select the Partners Petrol Nominal Enter the date, reference and description.
Enter a ‘C’ for Credit.
Amount 0.00
Vatable yes
Rate 15 %
VAT adjustment = enter the amount of the output VAT applicable.
On saving this posting the system will prompt you to enter the full amount of Road Fuel Scale Charge (net + vat)