Fuel duty and VAT

[Eric the Half a Bee]

I understand fuel duty is paid per litre (nearly 53p for petrol pl) and that VAT is then added based on the overall cost.

If that is so, would the extra gained in VAT cover the 5p reduction of a few months ago and could any further cuts in duty be offset by VAT?

[HiVis]

I understand fuel duty is paid per litre (nearly 53p for petrol pl) and that VAT is then added based on the overall cost.

If that is so, would the extra gained in VAT cover the 5p reduction of a few months ago and could any further cuts in duty be offset by VAT?

VAT is charged on the whole price, so if the cost is say £1, which includes the 53p duty, then the cost is £1.20 at the pumps. If fuel duty drops to say 40p per litre, and we suspend reality for a second and assume the petrol companies pass on the saving, then the pre VAT cost is £0.87 and the with VAT price is £1.04

[Brian]

VAT is charged on the whole price, so if the cost is say £1, which includes the 53p duty, then the cost is £1.20 at the pumps. If fuel duty drops to say 40p per litre, and we suspend reality for a second and assume the petrol companies pass on the saving, then the pre VAT cost is £0.87 and the with VAT price is £1.04

This is why I cant understand why the government don't do more.

When fuel was say £1 per litre, to keep figures simple, the gov. we getting about 64p per litre in duty and vat (so cost 36p per litre). If raw costs at double to 72p per litre and £2 at the pumps it means they're then raking in £1.28 per litre in taxes so they're happy as Larry.

A 5p per litre cut is pathetic considering they're making a shed load more than they were a few months ago.

Am I missing something - they could take 40p of a litre and still be earning more?

[JamesWales]

The treasury are taking 20% of £1.85 or whatever (37p) whereas before they were taking 20% of £1.25 (25p) because the VAT is charged on the total cost, including duty - so we are effectively paying twice; once in fuel duty and then again in VAT which is to a large part increased by the duty costs itself!

Although that is offset to some extent by fuel duty falling to it's lowest level in 14 years (52.95p a litre down from 57.95p a litre a few months ago.

In short, the treasury have knocked 5p off duty, but are getting an extra 12p in terms of VAT, so they are still getting 7p more a litre than, broadly speaking, before the Ukraine crisis. The best thing to do would be to temporarily reduce VAT on fuel to 10 or 15% really, although I am not sure how easy that is or whether it sets a precedent for doing so on all kinds of products.

Personally, I am not a fan of VAT as it's regressive and 20% is a big figure. Fuel is critical to the country and I would reduce it's VAT level anyway. Try telling that to the Green lobby though.

It's also worth noting that tax as a percentage of pump price is lower than it has been for a long time.
https://www.racfoundation.org/data/t...rice-data-page

Interesting Excel graph here on fuel prices
https://www.gov.uk/government/statis...ad-fuel-prices

[Cleve van Leef]

Government is quite happy to have rising fuel prices, helps to cover the “help” they give the public. Give with one hand, take away with the other.

[HiVis]

The treasury are taking 20% of £1.85 or whatever (37p) whereas before they were taking 20% of £1.25 (25p) because the VAT is charged on the total cost, including duty - so we are effectively paying twice; once in fuel duty and then again in VAT which is to a large part increased by the duty costs itself!

Although that is offset to some extent by fuel duty falling to it's lowest level in 14 years (52.95p a litre down from 57.95p a litre a few months ago.

In short, the treasury have knocked 5p off duty, but are getting an extra 12p in terms of VAT, so they are still getting 7p more a litre than, broadly speaking, before the Ukraine crisis. The best thing to do would be to temporarily reduce VAT on fuel to 10 or 15% really, although I am not sure how easy that is or whether it sets a precedent for doing so on all kinds of products.

Personally, I am not a fan of VAT as it's regressive and 20% is a big figure. Fuel is critical to the country and I would reduce it's VAT level anyway. Try telling that to the Green lobby though.

It's also worth noting that tax as a percentage of pump price is lower than it has been for a long time.
https://www.racfoundation.org/data/t...rice-data-page

Interesting Excel graph here on fuel prices
https://www.gov.uk/government/statis...ad-fuel-prices

VAT isn't regressive by a long stretch as it is a tax on consumption. Its quite progressive if you (i) set the rate high enough and (ii) you zero rate those purchases that are required for everyday living only taxing the true luxuries of life. Those who spend on those luxuries pay the most tax, those who only can afford the essentials pay nothing.

[JamesWales]

VAT isn't regressive by a long stretch as it is a tax on consumption. Its quite progressive if you (i) set the rate high enough and (ii) you zero rate those purchases that are required for everyday living only taxing the true luxuries of life. Those who spend on those luxuries pay the most tax, those who only can afford the essentials pay nothing.

Obviously it can be avoided by not buying anything, but the definition of essentials varies by person.

It's regressive in the sense that someone on £20k a year who needs to run a car pays the same rate as someone on £200k a year who needs to run a car.

Thats another debate altogether though.

[North Cardiff Blue]

Obviously it can be avoided by not buying anything, but the definition of essentials varies by person.

It's regressive in the sense that someone on £20k a year who needs to run a car pays the same rate as someone on £200k a year who needs to run a car.

Thats another debate altogether though.

The green initiative is to reduce the number of people using cars and have more efficient boilers and better insulation, what a coincidence everything is going up and people are starting to be priced out of car ownership?

[Rjk]

VAT isn't regressive by a long stretch as it is a tax on consumption. Its quite progressive if you (i) set the rate high enough and (ii) you zero rate those purchases that are required for everyday living only taxing the true luxuries of life. Those who spend on those luxuries pay the most tax, those who only can afford the essentials pay nothing.

yes, theres an interesting case for scrapping all income taxes and increasing VAT instead

[BLUETIT]

Just filled up a Vauxhall zafira , £80 f***ing quid .

The fuels worth more than the car

[The Bloop]

The move away from petrol and diesel to electric is having a massive impact on govt revenue from fuel.
Charge your car up at home and you're paying 5% VAT instead of 20% at the pump, so I can't see the govt doing anything on fuel duty and its VAT.

[life on mars]

Help is at hand

£35 per clinic visit
Sperm donors can receive up to £35 per clinic visit to cover their expenses, with more available if your expenses for things like travel, accommodation or childcare are higher than this. It's illegal to pay sperm donors more than their reasonable expenses.

[North Cardiff Blue]

Help is at hand

£35 per clinic visit
Sperm donors can receive up to £35 per clinic visit to cover their expenses, with more available if your expenses for things like travel, accommodation or childcare are higher than this. It's illegal to pay sperm donors more than their reasonable expenses.

Quite a few of them on here

[BLUETIT]

Help is at hand

£35 per clinic visit
Sperm donors can receive up to £35 per clinic visit to cover their expenses, with more available if your expenses for things like travel, accommodation or childcare are higher than this. It's illegal to pay sperm donors more than their reasonable expenses.

That’s wank

[JamesWales]

Quite a few of them on here

Beat me to it.. Pardon the pun

[life on mars]

Is it worth battling the purple-headed yogurt slinger ??

[HiVis]

Obviously it can be avoided by not buying anything, but the definition of essentials varies by person.

It's regressive in the sense that someone on £20k a year who needs to run a car pays the same rate as someone on £200k a year who needs to run a car.

Thats another debate altogether though.

Then you make VAT on petrol zero rated and VAT on news cars 40%. Those buying expensive new cars pay considerably more VAT than those buying a second hand car where the VAT rate is only applied to the margin and not the whole price.