Mileage allowances

By Tolley
Mileage allowances

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Mileage allowances
  • When are mileage allowances paid?
  • Approved mileage rates for company cars used on company business
  • Mileage rates for private cars used on company business
  • What records need to be maintained?
  • What VAT can be claimed on mileage allowances?

This guidance note provides details of the approved mileage rates and the fuel element that businesses can reclaim VAT on if they pay employees a mileage allowance when a car is used on company business.

When are mileage allowances paid?

Businesses can pay mileage allowances in the following circumstances:

The business funds both private motoring costs and it does not want to pay the VAT fuel scale chargeIf the business pays for fuel purchased for both business and private motoring and it does not want to pay the fuel scale charge, it will be necessary for the business to keep detailed mileage records that clearly separate the business from private mileage. VAT can only be reclaimed on the business mileage undertaken.
Please see Example 1 for how to calculate the amount of VAT that can be recovered

More on Claiming input tax: