Motoring expenses - VAT and personal tax

Motoring expenses - VAT and personal tax

Didn't find your answer?

Hi, Please could someone advise whether the following treatment of motoring costs works...

A director of a limited company (VAT registered) uses a personal car partly for business.  The director keeps records of all business miles traveled, and the company pays a mileage allowance of 45p per mile.  The fuel element of this is 15p per mile, and so the limited co will reclaim 1/6 of the 15p fuel cost as input VAT.

This recovers the VAT incurred on fuel, but not on other maintenance costs.  So, the HMRC VAT rules state that the company can reclaim VAT on servicing and maintenance costs, so long as there is some business use of the car and the business pays for them.

So if the limited company also pays directly for, say, servicing costs, then the company has paid twice for these costs - once directly to the garage, and then again via an element of the 45p per mile reimbursed to the director.  So if these servicing / maint costs (paid for by the company) were then offset against the directors loan account, is there any benefit in kind arising or any personal tax effect?  Is there anything wrong with the above arrangement?

Thanks! 

Replies (1)

Please login or register to join the discussion.

By Marion Hayes
25th May 2014 12:33

PAYE payment

If the company pays the bills then it is paying the personal liability of the Director and the full payments form part of gross pay for both tax and national insurance - payment of a pecuniary liability.

They are then part of gross pay for ct purposes  as well as part of the Directors salary for PAYE purposes.

I am not conversant with the VAT consequences but even if yoou can claim it back in these circumstances it does not reduce the remuneration figure.

 

 

Thanks (1)