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Self-Employed Reimbursed Fuel

How to Account for Reimbursed Fuel

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Hi

I have a client who bills their client for car allowance and also fuel.  The fuel receipts are reimbursed mostly in full and sometimes at 90% of the total.

I include all of this as income and usually I deduct reimbursed expenses to give a net income before deducting other expenses.  As it is fuel do I need to add the fuel to all other motor expenses and apply business usage percentage to that or can the fuel invoiced for be deducted in full as a reimbursed expense?

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By rmillaree
20th May 2022 11:35

"As it is fuel do I need to add the fuel to all other motor expenses and apply business usage percentage to that or can the fuel invoiced for be deducted in full as a reimbursed expense?"

I would recommend going back to basics hear - discard reimbursed items - add up all motor expenses (that will be all actual expenses in full - including items reimbursed) and work out overall "private use addback" as you would do in exactly the manner you would do if there were no reimbursements - by splitting into two calcs you are making life harder and increasing chances overall calcs may be wrong (IMHO) - note differences might not be material in the scheme of things - only thing that matters here though is total miles done and % business and % not business and adding back correct % of the total - i am presuming fixed mileage not an option.

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By Bobbo
20th May 2022 11:48

CarolMc wrote:

can the fuel invoiced for be deducted in full as a reimbursed expense?

No, because the 'fuel' they invoice the client for doesn't necessarily bear any resemblance to the deduction they are entitled to for fuel expenses

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Replying to Bobbo:
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By Hugo Fair
20th May 2022 14:02

Unless of course it does (i.e. if client only charges for actual fuel consumed on the specific & relevant miles) ... unlikely, but I've seen it done (with a detailed logbook).

However, it would be much simpler to do as rmillaree suggests.

One other point ... there's no need for the client to restrict the amount charged to the (supposed) cost of fuel.
We charge 65p/mile in order to make sure that 45p/mile is more than covered if employee is using own car ... but either way, the cost of travel isn't just the fuel, so why restrict the re-charge to that part?

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By DKB-Sheffield
20th May 2022 15:11

Out of interest...

You say:

"I have a client who bills their client for car allowance and also fuel."

And then:

"The fuel receipts are reimbursed mostly in full"

Is VAT coming into this somewhere?

It's only a sneaking concern but, if the client is not VAT registered, and is providing receipts to their 'customer*', is the 'customer' then declaring those receipts for VAT? It could be seen as an odd way of working if that were not the case?

* The 'customer' is quoted thus as I have seen 2 potential areas of concern in the question. The fuel part, and the "car allowance" part.

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Replying to DKB-Sheffield:
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By CarolMc
20th May 2022 16:19

My client is not VAT registered. Sometimes she is advised to charge 90% of the fuel bill, I assume to take into account private usage.

The client works in the art department for film and TV. I have a number of clients in the same industry and they are often paid for use of their car and use of their kit.

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Replying to CarolMc:
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By Hugo Fair
20th May 2022 16:47

The problem is the phrase "charge 90% of the fuel bill" ... what 'fuel bill'?
If you mean her receipts from the garage then these have no obvious correlation with any mileage she has incurred on behalf of her Art dept client ... hence rmillaree's eminently sensible suggestion of 'going back to basics'.

I'll admit that I previously missed the reference to your client also "bills for car allowance" - so withdraw my earlier comment about charging a flat fee.
However that does ring a different warning bell ... payment of an 'allowance' is redolent of an employment relationship, so are you sure that your client is S-E?

As an employee it would not be uncommon for:
* Either payment of a car allowance (taxable under PAYE) to cover proportion of employee's costs incurred in provision of roadworthy car PLUS a mileage rate for any 'business miles';
* OR payment of the Advisory Fuel Rate for business mileage if the company (not employee) provides the car.
In both cases it is obviously essential that a proper record is maintained of the mileage (claimed and unclaimed), but there's no need to worry about the exact amount of fuel consumed.

BTW if your client's client is VAT registered then they can claim the VAT as input by reference to the fuel receipts - so long as the receipts total the same (or more) than the amount your client is claiming.

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Replying to Hugo Fair:
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By CarolMc
20th May 2022 17:23

Thanks - yes I agree with the suggestion of back to basics.

I get your point about the allowance suggesting employment, but in this case the employment status is determined by factors such as type of production, length of engagement and the exact role fulfilled. The production company determines the employment status for each job following specific HMRC guidelines for TV and Film.

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