Readers’ forum: VAT on fuel

My client is a construction plant hire company. The business buys red diesel in bulk which goes into two fuel tanks they have on their site. If the supply is below 2 300 litres the fuel is subject to the reduced 5% rate of VAT.

The plant and machinery is hired out with a full fuel tank to the customer and the litres of fuel supplied each month are duly declared on the red diesel returns. On occasion customers who hire plant for a long time may require additional supplies of fuel which they call back into the depot for and collect in jerrycans.

When an item of plant has been off-hired and returned to the depot my client refills the tank and the customer is charged for their usage.

Historically my client has charged the customer VAT at 5% on the fuel both supplied...