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Dec 29, 2022How to Claim VAT Mileage in the UK
The Blue dot Team
The Blue dot Team
Value-Added Tax rules vary from country to country. In the UK, when a private vehicle is used for business purposes, it saves the business from leasing the employee a car. There is an additional “value-added benefit” – VAT reclaim.
When a UK employee uses their car for business – beyond the usual commute to work – the employer can make a claim against the approved mileage allowance payment rate to reclaim some money back.
The amount of VAT that UK companies can reclaim on mileage is determined by HMRC – HM Revenue and Customs. Studies show that over 50% of company car drivers in the UK are unaware of HMRC rules regarding business mileage.
This blog aims to clarify UK laws regarding VAT reclaim for mileage.
Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
Up to 1600 | 60.7 | 188.9 pence | 858.5 pence | 14.2 pence | 14 pence |
1601 to 2000 | 49.8 | 188.9 pence | 858.5 pence | 17.2 pence | 17 pence |
Over 2000 | 38.8 | 188.9 pence | 858.5 pence | 22.1 pence | 22 pence |
Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
Up to 1400 | 51.9 | 164.4 pence | 747.4 pence | 14.4 pence | 14 pence |
1401 to 2000 | 44.1 | 164.4 pence | 747.4 pence | 17.0 pence | 17 pence |
Over 2000 | 28.8 | 164.4 pence | 747.4 pence | 25.9 pence | 26 pence |
Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
Up to 1400 | 41.5 | 91.2 pence | 414.6 pence | 10.0 pence | 10 pence |
1401 to 2000 | 35.3 | 91.2 pence | 414.6 pence | 11.8 pence | 12 pence |
Over 2000 | 23.0 | 91.2 pence | 414.6 pence | 18.0 pence | 18 pence |
According to HMRC rules, 45 pence per mile covers expenses that go beyond fuel. This includes things like:
Furthermore, if you claim over 10,000 miles, you are considered to be reimbursed for the business portion of the fixed costs of owning a car.
The portion of the 45/25 pence mileage rate that is for the fuel element – according to the Advisory Fuel Rates – is eligible for VAT reclaim. Therefore, if an employee pays for fuel for the car (private or business), the VAT on this fuel can be partially recovered.
If an employee in your company has a car with a petrol engine of 1500cc, then the fuel element of the 45/25 mileage rate is 14 pence per mile (September 2019):
14 pence per mile represents 120% (100% plus 20% VAT)
Therefore 20/120 multiplied by the 14p results in 2.33 pence per mile.
So, according to Advisory Rates, your business can claim back 2.33p in VAT for each mile for which fuel is compensated to that employee.
Do not forget that the business will need to present VAT receipts – upon request from HMRC – showing sufficient VAT charged on fuel to cover the claim. The receipts linked to a particular claim should not be older than the actual travel date.
In order to calculate the VAT recovery on mileage, the following data is required:
Travel Expense Management systems usually have a module that enables you to record the required data with ease. The data archived with the fuel receipt image should be sufficient for a UK business to recover VAT on mileage successfully. Blue dot VATBox can perform the full audit to ensure you act in full compliance with the law and regulations.
Even if all the data is not fully available in your Travel Expense Management System, VATBox is usually capable of extracting certain parts of the required data from the receipt images and use alternative data sources to complete the picture.
If you are looking to increase VAT reclaim for UK mileage while maintaining effortless compliance, Blue dot VATBox can help. VATBox has helped Michelin recover over €3,000,000. VATBox streamlines the global VAT recovery process, adding a layer of visibility, compliance, and data integrity.
Get a head start on 2023 by automating your taxable employee benefits with Blue dot!
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