Business mileage claims are often processed incorrectly. Fuel may have been passed through the company records, ostensibly for business use. However, the “correct” way is to claim a mileage allowance. This is at a rate of 45p per mile (if using a personally owned car). If a company car is provided but business mileage only is claimed back from the company, only the HMRC approved fuel rate should be used. This has the possibility of changing every 3 months though so care is needed to ensure the correct rates are in use.
Another often overlooked element of this is that an additional 5p per mile can be claimed per extra passenger on a business trip.
Another rule is that the first 10,000 miles in a tax year can be reimbursed at 45p and the rate drops to 25p thereafter.
For VAT registered businesses, VAT on the fuel element can be reclaimed. It is necessary to keep petrol VAT receipts that show VAT of at least the amount being reclaimed in a period.
If the fuel element of the 45p is say 20p (but as mentioned above it varies every 3 months) and 1000 business miles are being claimed – the VAT inclusive element is 1000 * 20p = £200 and the VAT element of this is 1/6 = £33.33.
There are apps for your mobile device or programs for your PC which ensure the mileage claims and VAT are correctly computed.
Please ask us if you would like to know more.
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