Question, I run my own small limited company and I have recently started using my personal car for some work journeys when I meet clients at their offices. I know I am able to claim mileage expenses back from my company but what is the situation with regards to claiming back any VAT?  My company is on the standard VAT scheme.

 

Claiming VAT on mileage

Answer, August 2017:

As long as your travel meets the criteria as allowable business travel then you are correct that you can claim mileage expenses back from your company.

The question as to what travel journeys are allowable is a whole other topic and something we cover in detail in our eBook, however for the purposes of this blog post we’ll assume the travel is allowable and just cover how mileage expenses work.

If you use your own vehicle for work journeys you can claim mileage expenses at the rates below:

  • Cars and vans – first 10,000 miles at 45 pence per mile, then 25 pence per mile thereafter
  • Motorcycles – 24 pence per mile for all mileage
  • Bikes – 20 pence per mile for all mileage

In the situation of cars, the 10,000 miles is measured over a personal tax year, not the company accounting year, so you need to keep a track of your mileage claimed for each personal tax year period, 6th April to 5th April.

In order to claim the mileage from your company you should keep detailed mileage records of your work journeys -in the event of an investigation by HMRC they would wish to see a mileage log detailing the business journeys made which should include the date, number of miles for each journey and details of the locations driven to and reasons for each journey.

As an example, if you used your personal car for 15,000 miles of allowable business journeys in a tax year, this would result in an expense claim of £5,750 – this is calculated as:

  • 10,000 miles x 45 pence = £4,500
  • 5,000 miles x 25 pence = £1,250
  • Total £5,750

As you are on the standard VAT scheme we then need to consider what VAT your company can claim back on this mileage.

The mileage rates are meant to cover all vehicle costs which include fuel and maintenance – for example, of the 45 pence per mile rate, part of this is meant to cover fuel and part of it the other running costs of a car.

In order to work out what the split is of fuel vs other for cars, HMRC have another set of mileage rates which are called ‘Advisory Fuel Rates’, which can be found on the link below.

These rates are technically for company owned cars, but they are also used for working out the VAT element on mileage claims.

Advisory Fuel Rates

These rates are regularly updated so you have to make sure you are referring to the current rates when doing your VAT calculations.

You can see from these rates that they vary depending on the car fuel type and engine size.

As an example if we look at a 2100cc Diesel car and a mileage claim of 1,000 business miles, you can see that the advisory fuel rate is 13 pence per mile (correct at the date of publication of this article, Aug 2017).

So of the 45 pence / 25 pence per mile claimed, 13 pence relates to fuel.

13 pence per mile x 1,000 miles = £130

The VAT within £130 of VAT inclusive costs is calculated as:

(£130 /1.2) x 0.2 = £21.67 VAT.

Because you are on the standard VAT scheme you can claim this £21.67 of VAT back on your VAT return, however there are two conditions below:

  • Your company has to actually re-imburse you for at least the 13p per mile rate being used (if they are paying you at 45p / 25p per mile then this is fine)
  • You need to keep till VAT receipts for fuel purchases which (in total) show at least the £21.67 of VAT.  The till receipts should be dated within a reasonable period of the mileage being claimed i.e. slightly before and after is fine

 

 

 

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