Commentary

V7.448 Mileage payments

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.448 Mileage payments

Part V7 Tax planning | Commentary

V7.448 Mileage payments

Introduction

The VAT situation for a business that purchases road fuel was considered above – we will now look at the situation where an employee purchases the fuel himself – and then claims some recompense from his employer on a mileage basis.

Note that in reality, a business is unlikely to reimburse any mileage claims for employees making private trips – this would not be commercially realistic and would also cause problems for direct tax purposes. We will therefore assume in this section that mileage claims are for business journeys only.

We will split this topic into two parts:

  1.  

    •     where the mileage payment is to cover the petrol cost only

  2.  

    •     where the mileage payment is to cover all motoring costs, eg wear and tear on the vehicles, contribution towards insurance/repair costs

A key point to be aware of is that input tax claims must now be supported by petrol receipts (tax invoices) attached to the mileage claim.

Mileage payment for petrol cost only

Consider the following example.

Example 4

Bill is employed by ABC Limited and is provided with a 1,800cc petrol company car but is

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