How to claim VAT on mileage allowance payments

If a business is VAT registered then they can claim VAT on mileage allowance payments made, subject to certain rules and requirements as set out by HMRC.

What are Mileage Allowance Payments?

Mileage Allowance Payments (MAPs) are an amount you or your employees can claim as an allowable business expense for business miles travelled in personal vehicles.  The amounts that can be claimed are set by HMRC and are currently:

Type of vehicle First 10,000 miles Above 10,000 miles
Cars and vans 45p (40p before 2011 to 2012) 25p
Motorcycles 24p 24p
Bikes 20p 20p

 

The mileage allowance payment figures above cover not just fuel, but also an amount to reflect the depreciation, insurance and other running costs of the vehicle being used.  Any VAT claimed back only relates to the fuel element, therefore a reduction needs to be made.

Advisory Fuel Rates

Mileage allowance payments are higher because they reflect wear and tear, insurance and car maintenance, so are used when people use their personal vehicles for business purposes.  Advisory fuel rates relate to just fuel so are used where individuals have been provided with Company Cars and the business covers the cost of car maintenance and insurance and it is on this figure you should calculate how much VAT to reclaim.

Find out the Advisory Rates HERE.

An Example of Claiming VAT on Mileage Allowance Payments

An employee make a claim for business mileage of 100 miles at 45p per mile.  The total expense claim is therefore £45.  You establish that the employee drives a petrol car which has a 1400cc engine and therefore the amount of the mileage claim relating to fuel (advisory rate) is 11p per mile. The input VAT to be reclaimed is:

Gross Fuel Cost 11p x 100 miles = £11

VAT on Fuel £11 x 20/120 = £1.83

Net Fuel Cost £11 x 100/120 = £9.17

What VAT Records Should You Keep To Support Your Claim

When a claim is submitted for a mileage claim you should keep the VAT receipts for fuel purchased, along with VAT receipts for the fuel they filled up their vehicle with around the time of the business trip.

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.