How to Claim VAT Mileage in the UK

How to Claim VAT Mileage in the UK

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.

 

How Much VAT Can Be Reclaimed?

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.

 

From December 1, 2022, the HMRC Advisory Fuel Rates are:

Diesel AFR methodology

Engine size (cc)Mean MPGFuel price (per litre)Fuel price (per gallon)Rate per mileAdvisory fuel rate
Up to 160060.7188.9 pence858.5 pence14.2 pence14 pence
1601 to 200049.8188.9 pence858.5 pence17.2 pence17 pence
Over 200038.8188.9 pence858.5 pence22.1 pence22 pence

 

Petrol AFR methodology  

Engine size (cc)Mean MPGFuel price (per litre)Fuel price (per gallon)Rate per mileAdvisory fuel rate
Up to 140051.9164.4 pence747.4 pence14.4 pence14 pence
1401 to 200044.1164.4 pence747.4 pence17.0 pence17 pence
Over 200028.8164.4 pence747.4 pence25.9 pence26 pence

 

LPG AFR methodology

Engine size (cc)Mean MPGFuel price (per litre)Fuel price (per gallon)Rate per mileAdvisory fuel rate
Up to 140041.591.2 pence414.6 pence10.0 pence10 pence
1401 to 200035.391.2 pence414.6 pence11.8 pence12 pence
Over 200023.091.2 pence414.6 pence18.0 pence18 pence

 

According to HMRC rules, 45 pence per mile covers expenses that go beyond fuel. This includes things like:

  • Insurance
  • Road tax
  • Depreciation
  • Vehicle wear and tear

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.

UK VAT Reclaim Example

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.

Requirements to Reclaim Mileage VAT in the UK

In order to calculate the VAT recovery on mileage, the following data is required:

  • Fuel type
  • Cylinder capacity of the engine
  • Origin and destination of the trip
  • Purpose of the trip
  • Mileage travelled for business
  • Respective VAT amount on the fuel receipt related to the claim
  • Sufficient total VAT amount on fuel receipts for the period

 

Calculating UK Mileage VAT is Easier Than You Think

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.

How Blue dot Enables UK Businesses to Increase Their VAT Reclaim

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!

We appreciate your interest in VATBox!

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