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VAT and Mileage allowance

VAT and Mileage allowance

Im looking to claim back the VAT element of mileage allowances paid to employees but unsure of the actual practical application of where the figures go on the VAT return

Its a 4 year claim. Say the total miles are 30,000 and the average monthly HMRC benchmark rate for fuel only mileage is £0.14

Is the VAT reclaimable £700

If its £700 i obviously include this amount in box 4, but what figure goes in box 7? Do i put no adjustment in this box or is it the net element of the £0.14

Some direction would be much apprciated


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19th Feb 2016 14:39

You have the receipts going back 4 years?

For me it depends on how box 7 normally looks, if the return looks silly without the balancing figure then I put it in, if it doesn't I don't.

As this is just an adjustment to the 'VAT Account' then all you really need to do is adjust box 4, and this is what HMRC's online guidance reflects. However HMRC's computers and officers do use box 7 for validation purposes, and since there are no penalties for incorrect declarations in box 7 I tend to go with putting in the net where necessary e.g. if 100% of costs were taxable I wouldn't have a box 4 that showed 110% of costs had been VATable that quarter.

Other than that your calculation looks correct i.e. 30,000 x 0.14 / 6.

I do assume two things 1 that you've used the average for illustrative purposes only,i.e. you have a record of the cars used and their actual CCs and 2 that you have required and retain petrol receipts for all mileage that you intend to claim. The main problem I've found on mileage claims is that many many employees don't retain the receipts and organisations are still willing to pay out the mileage claim without them.

If you don't have both of these things then you don't have the evidence to support a claim and you'd need to negotiate with HMRC over whether they're willing to accept alternative evidence through averaging/sampling to support a claim.

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19th Feb 2016 14:46

But presumably the expense payments went into box 7 in the periods when they were made (why wouldn't they?).

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19th Feb 2016 15:33

Yes spidersong
Yes figures are just an example and im going to have to spend an hour trawling through the last 48 months published rates on the HMRC webite and match them with the detailed mileage sheets.

There is far more vat on fuel receipts for this purpose than is claimable. There are 1000s of them so no risk there.

It was the practical application i was interested in as the client sells his services so has very little input tax to claim in the return and looks silly on the return with box 4 far exceeding box 7. I had read the guidance on it.

You have lost me John....... What do you mean???

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19th Feb 2016 15:38

When the expenses were paid they would have been in the figures that the box 7 figure was the total of, wouldn't they. All that's changing is that you are retrospectively identifying some of it as recoverable VAT.

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19th Feb 2016 15:47

With you now.

No there were not. Effectively they have been collected in a drawer ( years worth) a mileage allowance has been paid at the approved rates each month based on number of miles detailed on mileage sheets. The mileage amounts have been claimed in the one man band Ltd Co accounts and the fuel receipts have not. Not for CT return purposes or VAT purposes.

Is this wrong. He can claim mileage allowance through the accounts and the full value of the fuel receipts too??

My take on it was that the mileage allowance paid is included in the business records and the vat element of the mileage allowance paid is claimed on the vat as per spidersongs post above providing theres is at least £700 of vat on the fuel receipts over the period

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19th Feb 2016 16:00

One or the other

bumpdinkwhallop wrote:
The mileage amounts have been claimed in the one man band Ltd Co accounts and the fuel receipts have not. Not for CT return purposes or VAT purposes. Is this wrong.
The mileage allowance includes business fuel, so you either claim for one or the other. As fuel will almost certainly be partly used privately, claiming the fuel costs would create a taxable benefit in kind. For that reason claiming only business mileage is usual preferred.

The VAT reclaim is on the fuel element of the mileage reclaims. You need to have sufficient VAT fuel receipts to at least cover the amount claimed, but it sounds like that isn't a problem in this case.

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19th Feb 2016 15:58

This only makes sense if the £700 is the VAT element of the mileage expenses paid, presumably not previously accounted for as recoverable VAT.

My point is that I fail to see how the "gross" mileage expense payments are not already in the company's expenses over the last four years, and therefore in the input figures in box 7 on the VAT returns. If they are not in the company's expenses in its profit and loss account where are they - debtors? fixed assets? 

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19th Feb 2016 16:09

See where you coming from
Thanks Steph & peace.

John i see what your getting at. That has not happened here. The mileage payments have been coded so they dont appear on the vat return.
So back to how i go about the practical processing of the return..,,,,.and comfortable with the advice above and going to crack on with it.

Thanks lads

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