VAT on Mileage Claims & Example

How to claim VAT on mileage allowance payments

If a business is VAT registered then they can claim back VAT on mileage claims made since, generally speaking, you usually pay VAT at 20% on fuel. HMRC sets out strict rules that you must follow to get back VAT on mileage claims under different circumstances.

VAT on Mileage Claim by An Employee Using Their Own Car

An employee uses their own car to visit a client and is therefore entitled to make a mileage claim under the rules of Mileage Allowance Payments (MAPs) at 45p per mile.  Since the Mileage Allowance Payment covers wear and tear, depreciation, insurance and other running costs of the vehicle being used as well as the fuel, you cannot claim back VAT on the full 45p.  Instead HMRC requires that you claim back the VAT on the 45p at a set rate based on the cars engine size which they call Advisory Fuel Rates.

You establish that the employee drives a total of 100 miles, in a 1400cc petrol car.  Therefore the total mileage claim is £45.  The Advisory Fuel Rate relating to the claim is 11p. Therefore the input VAT to be reclaimed is:

Gross Fuel Cost 11p x 100 miles = £11

VAT on Fuel £11 x 20/120 = £1.83

Net Fuel Cost £11 x 100/120 = £9.17

VAT Records Required to Support VAT on Mileage Claims

Any VAT claimed on mileage must be supported by a VAT receipt for the fuel they filled up their vehicle with around the time of the business trip.