Value Added Tax (VAT) is the European equivalent of sales tax in the United States. Businesses that sell petrol are required to collect VAT on behalf of the government and forward that amount to the collection authority.
Definition
Petrol is the British equivalent of gasoline in the United States. For taxation purposes, the British government taxes petrol according to whether it is used as road fuel or for domestic fuel. For example, petrol used in a car's gas tank is road fuel, while petrol used for a home generator is considered domestic fuel.
Road Fuel
Road fuel is always taxed at the standard rate. VAT is collected on the total amount due for the fuel, including any excise duty. The standard rate of VAT in the United Kingdom was 17.5 percent as of August 2010. This is set to increase to 20 percent on Jan. 4, 2011.
Domestic Fuel
The VAT of domestic fuel is 5 percent. This rate is charged when used for heating a home, caravan, houseboat or other dwelling.
