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VAT on mileage claims
11 June 2024 - 2 min read

VAT on mileage claims

If you're an employer paying mileage to employees who use their own vehicle for work, you can claim VAT on the fuel portion of the mileage allowance you pay out.

Only business owners and employers can claim VAT on mileage. If that’s you, then read on to see how and to calculate how much you can claim from the HMRC.

How to claim VAT on business mileage

  1. Have employees track their mileage: Keep a log of all business journeys, including dates, destinations, and miles travelled.
  2. Have employees collect fuel receipts: Save all fuel receipts.
  3. Use the Advisory Fuel Rates: Refer to HMRC’s rates to find the AFR for the relevant vehicle.
  4. Calculate VAT: Multiply the business miles by the AFR and then calculate 1/6 of this total to find the VAT amount. You can also use the calculator below. 
  5. Submit your claim: Include your mileage claims in your regular VAT return with all your documentation.

VAT mileage calculator

To calculate the VAT amount you can claim for the mileage allowance you have paid out, find the HMRC Advisory Fuel Rate for the relevant vehicle. Then, simply adjust the slider in the mileage VAT calculator and enter the amount of miles you have reimbursed.

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How VAT on mileage works

To handle VAT on mileage correctly, you’ll first need to understand the difference between Mileage Allowance and Advisory Fuel Rates.

Mileage Allowance

A mileage allowance is a reimbursement for your employees when they use their personal vehicles for business purposes. HMRC allows them to claim up to 45p per mile for the first 10,000 miles in a tax year and 25p per mile for any additional miles. 

This allowance is designed to cover various costs, such as fuel, wear and tear, insurance, and road tax. However, employers can’t reclaim VAT on the entire mileage allowance. Instead, you can only reclaim it on the fuel portion of the mileage. To determine the fuel portion, you need to use HMRC’s Advisory Fuel Rates (AFRs), which provide the cost of fuel per mile for different types of vehicles.

Advisory Fuel Rates

Advisory Fuel Rates (AFRs) are set by HMRC to reflect fuel costs per mile for different vehicles and are updated regularly. You’ll need these rates to calculate VAT on mileage.

The AFR for the employees’ vehicles determines the amount of VAT you can reclaim on the fuel portion of their mileage allowance. 

For example, if a vehicle's AFR is 12p per mile and it drives 1,000 business miles, the total fuel cost will be £120 (miles x AFR). Since VAT is 20% and has already been included in the £120, you need to isolate the VAT from the total. Do this by multiplying the total by 1/6:

120*1/6=20 

This means you can reclaim £20 of VAT for those 1,000 business miles driven in a vehicle with an AFR of 12p per mile. 

What employers can’t claim VAT on

Unfortunately, you can’t claim VAT on:

  • Personal mileage (which includes personal trips and commuting from home to your regular place of work);
  • Mileage expenses if your business is not VAT registered; and
  • Mileage expenses if you use the flat-rate VAT scheme.

Keeping records

Keeping accurate mileage logs and fuel receipts can make your tax calculations easier and help distinguish between business and personal travel. 

FAQ

No, VAT is only reclaimable on the fuel portion of the mileage allowance, not the full 45p per mile allowance.
No, VAT is included in the fuel portion and is not added separately.
Multiply the business portion of your employees’ mileage by the applicable Advisory Fuel Rate, then calculate a 1/6 of this total.

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