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VAT on Mileage and Fuel Rates

By February 25, 2020January 29th, 2024No Comments3 min read

VAT on Mileage and Fuel Rates


Capture Expense stores company/private vehicles tax and fuel rates which allows the software to automatically calculate and store the correct mileage claims for staff as well as provide information for P11D forms.

Approved Business Mileage Rates

If you make expense payments to employees above a certain amount, you’ll have to report them to HM Revenue and Customs (HMRC) and deduct and pay tax. Mileage Allowance Payments (MAPs) are what you pay your employee for using their own vehicle for business journeys.

You’re allowed to pay your employee a certain amount of MAPs each year without having to report them to HMRC, this is called an ‘approved amount’.

Capture Expense stores the approved rates and you can generate a reports which shows how much you’ve paid to staff versus the approved amount, which is determined by simply multiplying the employee’s travel miles for the year by the rate per mile for the vehicle. The total includes any type of vehicle they’ve used. The rates below were correct in 2020.

Type of vehicle   10k miles   >10k miles
Cars and vans         45p               25p   Motorcycles            24p               24p   Bikes                       20p                20p  As an example: Your employee travels 12,000 business miles in their car – the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p).

You can generate a report from Capture Expense which will show the amounts paid, if they’ve been paid anything above the approved amount, HMRC can be notified using form P11D.

Anything below the ‘approved amount’ then you won’t have to report to HMRC or pay tax, but your employee will be able to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount. You can make separate optional reports to HMRC of any such unused balances under a scheme called the Mileage Allowance Relief Optional Reporting Scheme (MARORS). Contact HMRC for more information here:
 Advisory fuel rates
  Advisory fuel rates are the recommended repayment amounts when you are reclaiming the fuel element on business mileage. Including:
 – The amount of VAT to reclaim on business mileage in a personal vehicle- How much employers can reimburse employees for business travel in their company cars

The latest advisory fuel rates can be found here: VAT and Mileage
  The advisory fuel rates are inclusive of VAT, so for example:
 VAT at 20% and advisory fuel rate being 21p per mile for a distance of 100 miles. The gross amount would be £21.00, which would equal 120% of the fuel cost, so the VAT element is calculated by dividing the amount by 6, thus VAT mileage amount would be £3.50. Expense mileage reclaim in a personal car:   45p x 100    =  £45.00
 (21p x 100) / 6  =  £3.50  Net     £41.50    Tax     £  3.50     Gross £45.00
 Expense mileage reclaim in a company car:
   21p x 100          =  £21.00
 (21p x 100) / 6  =  £3.50

 Net     £17.50     Tax     £  3.50    Gross  £21.00

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