HM Customs and Excise 11
                                                  17 March 1998
______________________________________________________________

INCREASE IN VAT CHARGE FOR PRIVATE MILEAGE IN BUSINESS CARS
 
The scales used to charge VAT on fuel used for private
motoring in business cars  are to be increased by 6 per cent
for both petrol and diesel. The new scales reflect the
increase in pump prices over the previous year and the effect
of excise duty  changes in this Budget.

The new scales are to be used by businesses from the start of
their first accounting  period beginning on or after 6 April
1998.


DETAILS

The estimated revenue yield from this measure is 10 million
pounds in 1998/9 and 15  million pounds in 1999/2000 onwards.


NOTES FOR EDITORS


1.  Fuel scales were introduced for VAT in 1987 as a
simplified way for businesses to  account for VAT on the fuel
they buy which is used for private motoring. In principle, 
businesses can only  reclaim VAT on fuel purchased for
business use. But instead of  having to keep detailed records,
they pay a fixed charge - related to three bands of  engine
size - for VAT due on fuel used for private motoring. They can
then recover  the whole amount of VAT they paid when they
bought the fuel. 

2. This simplified procedure is authorised by EC derogation
from the provisions of  the Sixth VAT Directive and was
introduced following extensive consultation with  businesses.
This derogation limits increases in the scales to those
arising from  changes in pump prices and fuel duties. Hence
the increases in the VAT scales do  not mirror the increases
in the Inland Revenue scales for income tax (see Inland 
Revenue Press Notice No 6 ). The UK legislation for the VAT
fuel scales is in  sections 56 and 57 of the VAT Act 1994.


3.     Details for traders are available in Budget notice BN
40/98, which is available from  Customs and Excise Business
Advice Centres and from the Customs and Excise  Internet site.


4. Table

Press enquiries only to HM Customs and Excise, Public
Relations Office, New  King's Beam House, 22 Upper Ground,
London, SE1 9PJ.  
Telephone:  0171 865 5468/5471

Others should contact their local VAT Business Advice Centre,
listed under  Customs and Excise in the telephone book.

Customs and Excise Internet address: 
http://www.open.gov.uk/customs/c&ehome.htm

This news release can also be found at :
http://www.hm-treasury.gov.uk. Other Treasury material can
also be found at this  address.