VAT On Mileage Claims

VAT on Mileage

If you use your personal car for business journeys you are permitted by HMRC to reclaim 45p per mile which goes towards fuel and general wear and tear for the first 10,000 miles. After this the rate decreases to 25p per mile.

A common question from business owners is whether you can reclaim VAT on this charge?

The simple answer is yes – however the calculation is a bit complicated:

You can claim VAT on the deemed fuel element of the 45p per mile. HMRC have published the list of approved fuel rates here.

So for a car which is 1.4L or less the rate is 11p per mile. This means that of the 45p claim, 34p is deemed to be wear and tear and 11p is deemed to be the cost of fuel.

You are allowed to re-claim VAT on the fuel element (so the 11p).

The fuel element of 11p is deemed to be inclusive of VAT so equates to 120% (the normal value plus VAT at 20%).

This all starts to get a bit confusing so to illustrate it lets use an example of a claim for 100 miles:

  1. 100 miles at 45p per mile is £45.00
  2. The fuel element of this claim is £11.00 ( 11p x 100 miles)
  3. £11 is 120% so to calculate the net amount we divide by 120 and times by 100 (11 / 120 x 100 = £9.17)
  4. This means that the VAT element is £1.83 (£11.00 – £9.17)
  5. So for your claim of £45.00 the business is able to reclaim £1.83 in VAT.

In order to reclaim VAT on the fuel element alongside the mileage claim you must provide a VAT receipt for fuel which covers the fuel element. So in this example you would need a fuel receipt for at least £11.00.

A lot of business owners are not aware that you can reclaim mileage on VAT. Ok, so the calculation is a bit more complicated but at the end of the day it’s worth it if it gives you extra pounds in your pocket!

Xero certified Accountant and ICAEW Chartered Accountant

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