VAT claims and business mileage

To reclaim the VAT back on business mileage allowances paid to employees a business has to keep a proper VAT receipt. A debit or credit card slip, which most people are routinely given at the garage, is not sufficient. These rules were introduced at the beginning of the year but it is only now that HMRC are starting to check for these receipts on VAT visits.

The rules apply to the situation where employees purchase fuel themselves and then make an expenses claim based on a mileage allowance or their actual fuel costs. Employees driving company cars, as well as those employees who claim a mileage allowance for driving their own cars for business journeys, are caught by the rules.

Company car drivers who are paid a fuel-only rate need VAT receipts to at least cover the full amount of the mileage expenses claimed for business use.

Where employees are paid a rate per mile, typically 40p, for using their own car, VAT receipts will only be required to cover the fuel element of the expenses - typically 10p to 18p per mile. If the fuel element is, say, 12p, and 100 miles are claimed, the VAT receipts retained need to be at least £12.