No: C&E 4                           29 November 1994


                        BUDGET 1994 : VAT

                     CHANGES IN FUEL SCALES


The Chancellor proposes to increase the scales used for
charging VAT on fuel used for private mileage in business cars.

The Chancellor's intention is to keep the VAT scales in line
with those used to assess income tax (see Inland Revenue Press
Release IR 2) by increasing those for petrol driven cars by 5 per cent
and those  for diesel by 4 per cent.

The new scales will take effect from 6 April 1995.


NOTES FOR EDITORS

1.     The fuel scales have been increased in line with the
Budget     duty changes and pump prices over the previous year.  The
petrol    scale has gone up more than the diesel scale because,
although the duty increase on diesel is larger than that on petrol (see
C&E 17),  pump prices for diesel have fallen by about 2 per cent since
the last  Budget whilst petrol prices have hardly changed.

2.     The new scales and the VAT payable are shown in the
attached  table. Businesses should use these from the start of their
next accounting period beginning on or after 6 April 1995.

3.     The provisions covering fuel scale charges are set
out in Sections 56 and 57 of the 1994 VAT Act and came into force
on 6 April 1987.  Under these provisions a fixed charge - related to
three bands of engine size - is payable in respect of VAT due on fuel
used for    private motoring.  This enables the business to recover the
whole amount of VAT charged on the purchase of the fuel and avoids
the need for detailed mileage records to be kept by the business.

4.     This simplified procedure is authorised by European
Community derogation from the provisions of the Sixth VAT Directive
and was   introduced following an extensive consultation exercise with
businesses. Many representations suggested that the Inland
Revenue   income tax scales should be adopted for VAT purposes.

5.     The Chancellor is also taking the opportunity to
introduce a separate scale for businesses using annual VAT accounting
periods.    Currently there are about 4,000 businesses with a turnover
of less than Pounds 350,000 which account for VAT on an annual
basis, but this is likely to grow depending on the outcome of the consultation
exercise announced by the Chancellor on annual returns and payments
for traders with a turnover of less than Pounds 100,000 (see C&E
7).

6.     The estimated net revenue yield from these changes is
Pounds 10 million in 1995-96 and Pounds 10 million in 1996-97.

7.     Details for traders are available in Budget notice BN
98/94.




ISSUED BY:         HM CUSTOMS AND EXCISE,
                   PRESS AND INFORMATION OFFICE,
                   NEW KING'S BEAM HOUSE,
                   22 UPPER GROUND,
                   LONDON, SE1 9PJ

TELEPHONE:         0171 865 5468/5470/5471

FAX:               0171 865 5625


                                                  Table



  Cylinder
  capacity of         12 month period                3 month period                1 month period
  vehicle (cubic
  centimetres)

                 Scale  VAT due Scale   VAT     Scale   VAT   Scale   VAT     Scale   VAT   Scale   VAT
                 charge per car charge  due     charge  due   charge  due     charge  due   charge  due
                 diesel         petrol  per     diesel  per   petrol  per     diesel  per   petrol  per
                                        car             car           car             car           car

                 pounds pounds  pounds pounds   pounds pounds pounds pounds   pounds pounds pounds pounds

  1400 or less    605   90.10    670   99.78     151   22.48   167   24.87      50    7.44    55    8.19

  More than
  1400 but not    605   90.10    850   126.59    151   22.48   212   31.57      50    7.44    70   10.42
  more than
  2000

  More than       780   116.17   1260  187.65    195   29.04   315   46.91      65    9.68   105   15.63
  2000