UK businesses hit hardest by high fuel prices

9 May 2014

UK businesses hit hardest by high fuel pricesThe UK has the highest pump price for diesel in the world, and this cost is holding firms back, according to a new study by accountancy group UHY Hacker Young.

The UK levies taxes of 59% on diesel – the highest in any major economy – and 60% on petrol including VAT (the third highest). This is far in excess of duties in countries such as the United States, Canada and Australia, giving the UK the highest petrol pump prices of any major world economy.

In contrast, the United States levies 13% on petrol and 12% on diesel, whereas China levies no taxes at all on these fuels. Most UK commercial vehicles run on diesel. UHY Hacker Young reports that the cost of filling the tank of a Ford Transit van with diesel in the UK is £108.00. The cost of a tank of petrol is £110.40.

UHY Hacker Young says that while governments say levies are important in cutting greenhouse gas emissions, SMEs argue that they add costs for all businesses.

Even for Liquefied Petroleum Gas, an environmentally-friendly alternative to petrol or diesel, the UK still levies taxes of 60%, the highest tax on LPG in the developed world, and contributing to the third highest LPG costs in the world.

Roy Maugham, tax partner at UHY Hacker Young, said: "Taxes on fuel are an area in which the UK is placing a bigger burden on businesses than in many other countries. The 60% tax on petrol is still a considerable burden for businesses to carry, particularly as reclaiming the VAT element can be complex, especially for smaller businesses."

He added: "The United States is already quite a distance ahead of the UK in its economic recovery, and its lower levels of taxation in areas like fuel may well be helping to stimulate growth. Reduced taxes on diesel would be particularly advantageous for fast-growing small and medium businesses that run fleets of commercial vehicles, especially in sectors like distribution and retail. These businesses can be key drivers of economic recovery."

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