Recovering VAT on mileage payments

We pay our employees who use their own vehicles for business purposes, the Revenue approved tax free mileage rates of 40p and 25p per mile. We are VAT registered and want to know if we can recover any VAT on these payments?  

1st July 2008

HM Revenue & Customs publishes a deemed fuel only mileage rates in addition to the authorised mileage rates.

New fuel only rates ranging between 7p and 21p per mile were introduced on 1 July 2008 and are available on the website. These rates are dependant on the type of fuel (Petrol, Diesel, LPG) and size of engine (1400cc or less, 1401cc to 2000cc, Over 2000c).

If you are using the authorised mileage rates, you can only claim back the input VAT on the “deemed fuel element”. Also remember you must ensure, under rules introduced in Jan 2007, your employee submits a valid VAT receipt with their mileage expense claim for the amount of VAT reclaimed using this method.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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