Accounting & Tax for Fuel Pumps and Petrol Forecourts
The mechanics behind owning or running a fuel pump has always been complicated. Most people state that running a fuel pump (or petrol station) is not a profitable industry to go into. However, if on the other hand take a minute to think then there is the realisation that new ones are opening up all the time. It’s not just to make things more convenient for those driving, but it is also because there is money in it. There are also ways to be a little smart with the tax planning, as well as some issues surrounding it.
The vast majority of petrol stations will have a shop or kiosk that sells liquor, cigarettes, food items, or even clothing and other useful accessories. There may be a shop connected to the petrol station delivering cooked food, often run by the same people.
Fuel sales are responsible for the large part of the turnover; the shop produces the greater amount of profit. By having both, business maximise earnings and are able to show that they not only have an excellent turnover but also a large profit. A lot of the time, the owner of the petrol station will sell the fuel at a low commission price to remain competitive, but also owns the retail shop as it brings in the money.
One of the impacts this can have is an increase in VAT, but fuel pump owners may also experience a fluctuation of sales in fuel sales. This can be due to a number of factors, from the current price of fuel (if it’s more expensive people are more likely to wait until the last moment before refilling), as well as the location, and even the supermarkets in surroundings selling fuel at cheaper prices.
Where many stations adopt a model, running the fuel pumps and the shop separately, it can make things more difficult for HMRC to carry out an accurate assessment. This is because the fuel pumps and the shop are run on the same cash registers but produce receipts with different VAT numbers – one for the pumps and one for the shop.
This can be a little tricky when it comes to customers purchasing both food and fuel. As a result, receipts and numbers can get confused easily, which can result in too little tax being charged. It’s also easy to do as if one section does worse than the other, the poorly performing one may not have to pay tax that year. It’s simple and also perfectly legal, creating a moral tax issue.
In addition to this, many fuel pumps will partake in bunkering – which involves the mass storage of fuel on behalf of companies. Through this, the fuel is sold by different parties on both cash and credit. While it can help to increase the sales in the shops, it can also be one of the causal factors for a petrol station going through a slow period due to fluctuating fuel prices.
Selling fuel on accounts is what most of fuel forecourts like to retaining their surrounding industries as customers. Selling fuel on credit as opposed to cash can cause serious cash flow issues for a fuel pump, which is why many run the shop separately. It certainly can cause issues when it comes to the tax, but it can also be very beneficial to the petrol station and their ability to achieve forecasted targets.
The Accountancy Solutions are specialised accountants for Petrol Forecourts and Fuel Pumps. Weather your business is operating as CODO, DODO or COCO we design and implement bookkeeping and accounting systems which not only maintains daily, weekly and monthly cash flows but also enables to look at daily gross profit figure from sale of fuel. It also matched book stock with dip stock and difference can be adjusted in the books of accounts.
If you are looking to hire proactive accountants for fuel pumps, please contact us and we will ensure that you get the best and proactive services.