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Vat on business mileage rates

Vat on business mileage rates

Please can somebody clarify my understanding of the following?

Employer pays employee 40p per mile fixed rate for business mileage in private car per AA rates. This is accepted by HMRC with no further proof required of rate. If the employee provides a VAT receipt for the fuel element (11p-14p depending on engine size and fuel) the employer can reclaim the VAT on this fixed rate which equates to about 2p per mile maximum.

This just seems an unnecessarily cumbersome way to claim VAT when total and fuel rates are already preapproved by HMRC. Clearly the employee has had to purchase VATable fuel somehow in order to carry out the mileage claimed. Is this bureaucracy really necessary? Do employees need to request VAT receipts each time they fill up their private cars just in case they have to incur business mileage? Please tell me I'm wrong!


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27th Mar 2010 14:10

I think this is down to the EU

Can't remember the detail, but until quite recently, you didn't have to keep receipts - and then the EU stepped in and said there must be proof of purchase.

They need to provide enough receipts to cover the fuel used on business, which is probably not going to be every receipt they ever get.

Pointless, timewasting bureaucracy - hell yes, but this is the Government we are dealing with.


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29th Mar 2010 14:55

For once I think I have to support the government.....

As Taxhound says, the requirement for receipts was thrust on the UK by the EU - and I think the UK said no for a large number of years, but gave in when faced with legal action by the EU. 

My then VAT officer from LBS made sure we knew about the requirement, then commented that they had no intention of ever checking ....

Unfortunately we have a new VAT office now!




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29th Mar 2010 15:04

Mileage rates & VAT claim

The reason why you need to retain a purchase invoice is that the European Commission have insisted on it. Their problem was that the UK Government was allowing input tax claims where the claimant was not required to obtain an invoice.

Hence the new rule, whereby the mileage rate can still be used, but an invoice is also required, to 'cover' the VAT amount.

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By Anonymous
31st Mar 2010 15:40

For what it's worth....

Not withstanding the regulations, I was always and still am of the opinion that it is made as cumbersome as possible to disuade as many as possible from claiming the VAT back.  -Chief Cynic

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By Anonymous
04th Apr 2010 17:03

Thank you

Thanks to all for your feedback.

I was rather hoping that someone would say I was mistaken and such a bureaucratic burden would never be imposed on small companies.



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