If mileage expenses have been paid to employees (including Directors on payroll) for their business related journeys made in either their own vehicle or a company car, you can reclaim VAT on the fuel element of those mileage payments, although a company car, will in most cases include fuel used in private journeys, therefore the VAT fuel scale charge would also need to be taken into account.
EXAMPLE:
See the example below for claiming back the VAT for ‘Approved Mileage Expenses’:
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Car: 1600cc Petrol Vehicle
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Business Mileage Claimed: 1,000 miles
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Approved Mileage Rate: £0.45 per mile (click here for HMRC’s Approved Mileage Rates).
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Advisory Fuel Rate: £0.16 per mile (click here for HMRC’s Advisory Fuel Rates).
CALCULATIONS:
The Advisory Fuel Rate of £0.16 is included in the Approved Mileage Rate of £0.45, therefore the Approved Mileage Rate needs to be reduced by £160.00 (1000 X £0.16) and then added back as gross to calculate the VAT amount, see the example below:
As you can see from the above example, the total amount claimed is still £450.00, with the input VAT being reclaimed.
VAT Receipt:
All employees must supply the employer with fuel receipts totalling at least £160.00 to allow the business to reclaim the VAT detailed in the example above.