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Yes, you can (and should) claim VAT back on business mileage

A VansonBourne report published last year suggested that 54% of available VAT on mileage was not reclaimed by British businesses in the previous year – don’t let this be you!

Cambridge Payroll Pointing Image

Reclaiming VAT on mileage can seem rather complicated however once you get your head around it, it’s actually not that difficult. Here are the main points:

  • An employee can use their own car for business purposes and claim back mileage at an agreed amount, currently
    • 45p per mile for the first 10,000 miles; then
    • 25p thereafter
  • HMRC say that the 45p per mile is to cover many things for example insurance, road tax and running costs
  • You can reclaim VAT back on the road fuel element of the 45p

But how do you find out the what the road fuel element is?

HMRC publish advisory fuel rates that can be found here: https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016

Basically, for a petrol car they are:

  • Small cars less than 1400cc – 11p per mile
  • Cars between 1401cc and 2000cc – 14p per mile
  • Over 2000cc car – 22p per mile

And a diesel car:

  • Small cars less than 1600cc – 9p per mile
  • Cars between 1601cc and 2000cc – 11p per mile
  • Over 2000cc car – 13p per mile

Now here is the bit that feels kind of mind numbing…..

Cambridge Payroll Confusion

 

If an employee has a 1400cc petrol car the fuel portion is 11p per mile (March 2018)
• The 11p per mile represents 120% (100% plus 20% VAT)
• Therefore 20/120 multiplied by the 11p is 1.83p per mile.
• So for each mile you pay your employee, you can claim back 1.83p in VAT.

 

To put this in prospective, if you have a 2 litre business car that does 10k business miles in a year you could reclaim £183 and if your business has 10 cars all doing this type of mileage you could reclaim £1,833!

One last thing to note….
You need to be able to show HMRC on request VAT receipts that have enough VAT on them to cover the claim. So if for instance you are claiming vat back on 1000 miles, the VAT reclaim would be 1.83 x 1000 = £18.30 and the fuel receipts should total £109.80

If you would like us to provide you with a free template that you can use to keep note of your mileage each month and how much VAT you can reclaim then please comment below or get in touch via our Facebook page, Instagram or Twitter and don’t forget to sign up to our Newsletter for a monthly review straight to your inbox of our useful updates.

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