I am often asked whether VAT can be claimed back on employee’s mileage claims. This includes owner-managers who trade through a limited company and use their own vehicles for work purposes. The answer is yes…but you can only claim some of the VAT back. Mileage claims are most commonly paid based on HMRC’s authorised mileage rates (45p for the first 10,000 miles in the tax year and 25p thereafter). VAT cannot be claimed on the whole payment, but can be claimed based on the relevant HMRC fuel-only rate for the car in question.
The easiest way to manually calculate the amount of VAT that can be claimed is as follows:
1/. Find the current HMRC advisory fuel rate for your vehicle (the table is based on engine size and fuel type)
2/. Divide this figure by 6 (whilst the standard rate of VAT is 20%)
3/. Multiply the figure in 2 by the number of miles claimed.
So if an employee is paid 45p per mile for 60 miles, the amount paid to the employee is £27.00. If the car is a 2000cc diesel (advisory fuel rate = 15p per mile), the amount of VAT that can be claimed is £1.50 (60 miles times 15pence divided by 6). For your VAT records, the goods amount is £25.50 with £1.50 VAT.
We do have an app for the iphone and ipad that will do this calculation for you. Please see the link below.
I hope you find this information useful. Please do not hesitate to contact us if you need any further information.