Input VAT recovery on employee road fuel

Input VAT recovery on employee road fuel

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It is understood that in the UK a VAT registered (and assumed not partially exempt for this purpose) employer can recover VAT on mileage allowance payments to employees provided that (a) the fuel element of the mileage rate is not excessive and (b) the employee produces VAT receipts that do not post-date the reimbursement with sufficient VAT on the fuel to cover the VAT being reclaimed. So far, so good.

I also understand (correct me if I am wrong) that VAT branch of HMRC will normally accept as a reasonable fuel only mileage rate those rates that the Inland Revenue branch have published as giving rise to no BIK (when reimbursed in relation to employer-owned cars). OK, with evidence you could argue for a higher amount.

My question for the peanut gallery is this: If the total actual mileage reimbursement rate is LESS than the full amount that HMRC (IR branch) would have allowed without a benefit (ie LESS than 40p/25p per mile for up to/over 10K business miles) then would the VAT office proportionately disallow the fuel element that comprises part of that total mileage rate?

For example, if the fuel only rate is (say) 12p per mile and the full AMAP rate is 40p per mile but the stingy employer only reimburses at (say) 20p per mile, would the VAT office argue that of the 20p per mile reimbursed only 6p per mile is for fuel?
Clint Westwood

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By theaardvark
13th Feb 2006 11:52

You may reclaim VAT on the fuel element.
A VAT registered business is entitled to recover the VAT on the "Fuel Element" of a mileage rate paid provided that fuel element doesn't exceed the rate given on HRMC's website:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

Therefore, if the business states that out of the 12 per mile it pays only 6p per mile is for fuel then it is only entitled to claim VAT on that 6p per mile.

If not guide to the fuel element is stated the business is allowed to assume that the HRMC rates apply.

Hope that helps.

Paul Taylor
VATease - VAT Advice

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