Fuel is one of the most common commodities that almost every person consumes. A person, on average, pays hundreds of euros monthly for petrol, diesel, or oil expenses. But do you know that fuel is also taxed in Ireland?
VAT on fuel is a common practice in Ireland. All fuel types, whether petrol, oil, or diesel, have VAT included in their retail price. Businesses registered with HMRC can reclaim VAT on their fuel expenses through a particular procedure. In order to calculate vat, use our handy vat calculator tool to calculate vat with ease and get more accurate result.
If you want to know more about how VAT on fuel works in Ireland, then look no further, as this guide will explain everything.
Fuel is something that everyone consumes on a daily basis. However, most people are unaware of the fact that VAT (Value Added Tax) applies to fuel products.
Generally, fuel prices are inclusive of VAT, which makes it challenging for people to determine whether it is subjected to tax. But yes! If you purchase fuel or its products, you pay an additional amount to HMRC as your VAT.
VAT on fuel applies to all people at the same rate, regardless of whether they are operating a business or not. But, if you have a business registered with HMRC, you can reclaim it under specific conditions.
Similar to how VAT is included in fuel prices, flights also come with this additional charge. Whether you're a traveler or a registered business, VAT on flights applies universally. If you’re registered with the tax authorities, you can reclaim VAT under specific conditions. So, whether you're filling up your tank or booking a flight, VAT weaves its way into both aspects of daily life.
Though VAT is a general need, it is sectioned under the standard category instead of a reduced one. In Ireland the current VAT rate is 23%. It means that if you purchase 100 euros worth of fuel, you will pay a total of 123 euros, including the 23 euros of VAT.
The standard rate on VAT was recently increased from 21% to 23%. It was done due to the economic crisis because of the COVID-19 pandemic and the Russian-Ukraine war. Thus, the VAT rates for products are not fixed. They change from time to time due to the geo economic and geopolitical conditions.
However, fuel is further classified into several types, i.e., petrol, diesel, and oil. The VAT on these types can vary as their usage is different from each other.
Recently, the Irish government increased diesel rates after the EU imposed a ban on Russian oil imports. Before that, the VAT on diesel was increased from 21% to 23% in 2021.
At the start of 2023, a charter was introduced which individually changed the excise rates for diesel. According to the charter, the excise rates for diesel were increased by 7%.
However, you must remember that excise rates and VAT are different. Though excise is another tax type, it differs significantly from Value Added Tax.
As of now, no further modification has been made to the diesel VAT rate. It still falls under the standard category, entailing 23% VAT.
As compared to diesel, petrol is cheaper in Ireland. The charter increased its excise rate by 5% at the start of 2023. Similarly, its prices also hiked during this period.
This led many people to think that the Irish government has also increased its VAT rate. However, there is no such thing. When petrol prices rise, the VAT amount in the expenses also increases. But the standard rate remains the same.
Petrol belongs to the standard VAT category and is subjected to 23% tax. Since 2021, no changes in the VAT rates for petrol in Ireland have been made so far. Thus, it has the same VAT rate as diesel and other fuel products.
Electric cars follow a similar vat structure like petrol. Despite fluctuations in petrol prices impacting VAT amounts, the standard vat rate for electric cars has remained unchanged at 23%. Read more about electric cat vats to clear all your confusion, if you’re interested in electric cars.
If you use fuel for business purposes or in your business vehicle, you can reclaim the VAT on it. However, your business should be registered with HM Revenue and Customs (HMRC) to do so.
To reclaim the VAT, one must save the fuel receipts clearly stating the VAT percentage. Similarly, you must also describe how the fuel was used for your business. Businesses that are not VAT registered cannot claim VAT returns. Thus, if you are operating a business in Ireland, it is better to get registered with HMRC and get financially benefited from VAT returns.
ARFs (Advisory Fuel Rates) are reimbursement rates designated for drivers who work for business and use company vehicles. ARFs are set by HMRC in Ireland and can guide employers on how to reimburse employed drivers for their travel expenses.
Besides the actual fuel expense, the ARFs also cover associated expenditures such as insurance, depreciation, repair, and maintenance. For every fuel and vehicle type, the ARFs are different. The implementation of ARFs is not obligatory in Ireland. However, HMRC has regulated them so that fuel reimbursement is done fairly and the actual fuel prices are reflected in the expenses.
Seemingly, VAT is thought not to have any relation with ARFs. But it is not valid. VAT is indirectly associated with Advisory Fuel Rates. The ARFs can help determine the incurred VAT, which proves helpful in determining returns.
As of September 1, 2023, the ARFs in Ireland are the following;
For Petrol:
| Size of the Engine (CC) | Petrol Price (Per Litre) | Petrol Price (Per Gallon) | Rate (Per Mile) | ARF (in pence) |
|---|---|---|---|---|
| 1400 and below | 146.2 | 664.5 | 13.4 | 13 |
| 1401 to 2000 | 146.2 | 664.5 | 15.8 | 16 |
| Above 2000 | 146.2 | 664.5 | 24.9 | 25 |
For Diesel:
| Size of the Engine (CC) | Diesel Price (Per Litre) | Diesel Price (Per Gallon) | Rate (Per Mile) | ARF (in pence) |
|---|---|---|---|---|
| 1600 and below | 148.2 | 673.5 | 11.9 | 12 |
| 1601 to 2000 | 148.2 | 673.5 | 14.0 | 14 |
| Above 2000 | 148.2 | 673.5 | 18.6 | 19 |
For LPG:
| Size of the Engine (CC) | LPG Price (Per Litre) | LPG Price (Per Gallon) | Rate (Per Mile) | ARF (in pence) |
|---|---|---|---|---|
| 1400 and below | 87.3 | 396.9 | 10.0 | 13 |
| 1401 to 2000 | 87.3 | 396.9 | 11.8 | 16 |
| Above 2000 | 87.3 | 396.9 | 2 | 25 |
Thus, it is evident that every vehicle (by engine type) and fuel category has different ARFs. These are the reimbursement fuel prices drivers hired by companies receive at the end.
However, to even claim ARFs, the drivers must have all the receipts with VAT enlisted on them. The receipts not only include fuel but also insurance and maintenance. In case of their absence, the company has thorough authority to reject or decrease ARF reimbursement.
Oil products (inedible) can include engine oil, kerosene oil, furnace oil (FO), gas oil (gasoil), marine fuel oil (MFO), heavy fuel oil (HFO), and heating oils.
These products fall under the fuel category. Therefore, they are subjected to the same VAT rates as other fuel derivatives. They belong to the standard VAT classes and are taxed at a substantial 23% rate in Ireland.
Thus, if you purchase any of these oil products in Ireland, a 23% VAT will be automatically included in the bill. If you purchase these items for business purposes, then you can apply through the form for a VAT refund.
Another thing you need to work out while determining the VAT on fuel is the Fuel Scale Charges. It is a technique using which one determines the VAT that he must pay on fuel if he uses a private car for business companies.
Studying ARFs, it is evident that VAT on business fuel differs from what you pay on local use. Using VAT Scale Charges, one can easily determine the VAT return they should accept for business purposes.
Therefore, it would be apt to say that VAT Fuel Scale Charges efficiently shorten the VAT return process. With the help of this technique, one can easily determine their yearly or monthly VAT return in much fewer steps.
However, if this term is new to you and you don’t know how to use it, then refer to the following procedure;
Conclusion
VAT on fuel is a widely confused subject since its rates and ARFs change from time to time. Once you know how to calculate VAT, you will be able to file for returns easily. But if you want updated information about VAT on fuel, you can visit the government's official website or even consult HMRC
Like most things, fuel is also subjected to tax in the form of VAT in Ireland. This VAT is included in the overall fuel price. If you are running a business in Ireland, you can also reclaim it. But you can only do so if your business is VAT-registered. Currently, Ireland's fuel VAT is taxed according to the standard rate. Until 2020, the standard rate was about 21%. But in March 2021, it increased to 23% due to the Russian-Ukraine war.
FAQs
The increased traffic and ratio of fuel distributors have led to cheaper petrol and diesel in Northern Ireland compared to the UK. The UK's road fuel market has been under constant surveillance by the UK's Competition and Markets.
In 2008, the Government of Ireland moved all car taxation to a Carbon dioxide-based system. Car manufacturers took it as an opportunity and developed turbo-diesel engines whose performance and economy rivaled or surpassed petrol engines. As a result, the sale and popularity of diesel went off the charts.
Rían Doyle
I'm a VAT professional with years of experience helping businesses with compliance and reporting. My goal is to simplify VAT calculation and provide valuable insights through my engaging writing style and clear explanations of complex concepts.
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