SEARCH, INDEX, UPDATES, CONTENTS, INFORMATION, MILEAGE RATES, VAT IN MILEAGE ALLOWANCES
The European Court of Justice ruling dated 8 November 2001 caused HMRC to revise the position described below. With effect from 1 January 2006, it is still possible to recover input VAT in mileage claims, but only if the employee also provides invoices covering fuel purchases. The invoice can be a full VAT invoice or a less detailed VAT invoice but you should ask you employees to get them and then retain them with the mileage claims. There is no direct link between the fuel purchase and the mileage, but a much earlier or later invoice would appear to be irrelevant, so why not ask employees for all their current invoices?
Where a VAT registered business reimburses an employee for the cost of fuel, for a number of years it has been possible to treat the VAT element of that reimbursement as input VAT of the business.
C&E VAT Notice 700/64: Motoring Expenses states that for each employee there must be a record showing -
As far as we know HMC&E have not published details of fuel cost, but as at February 2002 the Inland Revenue website states "Customs and Excise will also accept the figures in the table for VAT purposes" referring to it's new advisory figures for Mileage Rates (Fuel Only).
Alternatively, the business can continue to determine the petrol element of mileage allowances, either by detailed records from the employee, or using AA published estimated petrol running costs as below, (pence per mile) -
| Cost new | Up to £10,000 | £10,000 to £13,000 | £13,000 to £20,000 | £20,000 to £30,000 | Over £30,000 |
| May 2003 | 7.98 | 9.98 | 11.97 | 12.83 | 17.10 |
|
Adjustment* |
0.10 | 0.13 | 0.15 | 0.16 | 0.22 |
* The May 2003 costs per mile are based on unleaded petrol at 79.0p per litre. For every penny more or less add or subtract the adjustment to the basic cost. Unfortunately we have not seen these figures officially updated.
The VAT cost is 7/47 of the above figures while VAT is 17.5%.
Beware the restriction of input VAT on cars including leased cars.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 24 December 2005.