No: CE 1                                            28 November 1995


                         BUDGET 1995 : VAT

     INCREASE IN VAT CHARGE FOR PRIVATE MILEAGE IN BUSINESS CARS


The Chancellor announced that the scales used for assessing VAT 
charged on fuel used for private mileage in business cars are to be 
increased by 5 per cent in line with the change in pump prices since 
last year.  The scales are also used by Inland Revenue to assess 
income tax (see Inland Revenue Press Release "Income Tax: Company 
car fuel scale charges for the year 1996-97").

The new scales will take effect from 6 April 1996 and businesses 
should use them from the start of their first accounting period 
beginning on or after that date.

NOTES FOR EDITORS

1.     The scales are uprated in line with the increase in pump 
prices over the previous year, allowing for the effect of this 
Budget's changes.

2.     The fuel scales were introduced in 1987 as a simplified way 
for businesses to account for VAT on the fuel they purchase which is 
used for private motoring. In principle, traders are only allowed to 
reclaim VAT on fuel purchased for business use. But this would mean 
having to keep detailed mileage records. The scales allow businesses 
to recover the VAT charged on their fuel purchases and, instead, pay 
a fixed charge - related to engine size - in respect of VAT due on 
fuel used for private motoring.

3.     This simplified procedure is authorised by EC derogation from 
the provisions of the Sixth VAT directive and was introduced 
following an extensive consultation exercise with businesses. The 
relevant legislation is in Sections 56 and 57 of the 1994 VAT Act.


4.     The estimated revenue yield from this measure is estimated at 
5 million Pounds in 1996/97 and 10 million Pounds in 1997/98.

5.     Details for traders are available in Budget notice BN 138/95.




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 5625/5667

Table


Landscaped chart not included - not suitable for electronic conversion