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Input VAT for director's travel

Input VAT for director's travel


A client was working full time, and in his spare time was spent trying to acquire a suitable franchise. This involved a great deal of travelling. At that time, guided by an accountant friend, he claimed VAT on mileage as follows (through a limited company which he set up): If the return mileage from his home was 100 miles, he would multiply this by a rate of 21p (have not seen this anywhere in the rules?), treat this as the gross input, then calculate input VAT as the appropriate proportion of this gross input. Can someone tell me if this is familiar to them?

Also as - while he was working full time - his 'work' on trying to acquire a franchise was done from 'home', would you agree that all his travel expenses would be allowable? 

Finally, while I am here anyway, the thorny question of entertaining. I know this is disallowed of course. But is there any scope for considering some of the teas and coffees as meeting expenses?

Many thanks in advance.



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20th May 2012 10:21

What I would have said

His mileage is claimable at 45 pence, clearly his normal place of work is his place of PAYE work so all his franchise mileage is business.  If he is VAT registered, he can claim 2.5 pence to 3 pence of this as the VAT element of the fuel within the 45 pence, as per the Table rates on HMRC website which change about every 6 months - depends on whether diesel or petrol and size of engine.

If whilst away from his home base he has a coffee that is allowable as subsistence, VAT allowable.  If he buys a potential UK client / supplier a coffee that is not allowable as it is entertaining.  If that client or supplier is overseas that is allowable due to the utterly bonkers, FU**ed up rules on business entertaining.


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By foxtrot
21st May 2012 11:21




Was not the exception for overseas entertaining removed as long ago as 1988 by that year's Finance Act

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21st May 2012 12:24


Exceedingly well remembered! Unfortunately you do seem to have been paying less attention in 2008/2009 when the ECJ decided Danfoss/AstraZeneca, which said that the UK amendment had no effect as EC law has direct effect on the point. See R&C Brief 44/10.

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21st May 2012 12:49

Pre-trading expenditure

If the franchise has not yet been acquired has the company actually got a business?  If not it is dormant, notwithstanding the expenses incurred and those expenses incurred in the seven years prior to commencement will be treated as an expense on the first day of trading assuming that they would have been allowable had trading commenced. 

The 21p is probably taken from the HMRC alternative Mileage rates which are used by people with a company car provided with private fuel reimbursing the employer for private use to avoid the BIK, and these rates are also the basis for the VAT adjustment to reflect private use which is now changed 4 times each year, not twice as mentioned above, although not every rate in the table changes.  The table is based on engine size rather than CO2.

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