Fuel mileage allowance

[Midsomer Mikey]

Please can anyone tell me what the current mileage allowance to & from work is, At the moment i clam 40p a mile but someone has pointed out it has gone up to 45p a mile so bit confused

[Deano1712]

It has recently gone up to 45p. See rates here:

http://www.hmrc.gov.uk/rates/travel.htm

[Midsomer Mikey]

Many thanks thats clear now

[Jonttt]

I'm a bit out of touch so things may have changed but that is the tax allowance before it is treated as taxable ie your employer can pay you less it's not a legal entitlement. They can also pay you more but then you are taxed on the difference. There is a mileage cap per year and the rate drops.

It is or at least was not allowable for home to work mileage which is taxable.

There should be plenty of guidance on the current rules on the HMRC website

[pingu]

If (for instance) you are paid 27p per mile for 15,000miles (£4,050), you can reclaim the TAX difference on the following allowance...

45p for 1st 10,000miles (£4,500) + 25p for the other 5,000miles (£1,250) = £5,750

Actual difference = £5,750 - £4,050 = £1,700

Assuming that you are a 20% tax payer, HMRC would owe you 20% of £1,700 = £340.

If you hadn't been paid anything by your employer, HMRC would owe you 20% of £5,750.

The mileage should not include any "home to normal place of duty" mileage.

[Jonttt]

Correct for business mileage but HMRC never used to class home to work as business miles. Have things changed ? I doubt it as it would mean everyone could claim tax back

[pingu]

Correct for business mileage but HMRC never used to class home to work as business miles. Have things changed ? I doubt it as it would mean everyone could claim tax back

The mileage should not include any "home to normal place of duty" mileage.

I always deducted "home to duty" mileage from all journeys. Apparently, if a journey is made directly from home to the alternative duty, "home to duty" does not need to be deducted. I always worked on the assumption that HMRC should not pay me to do miles that I would not normally do. I, therefore, only claimed for the additional mileage.

I used to travel 10 miles to work (20 in total). I would deduct 20 miles off every claim, unless I started or finished at my normal duty station, when I would deduct dither 10 miles or zero as appropriate.

You also need proof that the journey took place and how much you were paid for that journey. We would get annual statements from our transport office at the end of the tax year along with the HMRC claim form. The joys of an efficient civil service .

[Robert T]

As an employee, you can only claim for mileage outside your normal terms of employment, so unless your normal place of work is home, you are not allowed to claim for your normal commute to work. I officially work from home, so I have never had to mess around deducting miles. I would expect to be paid for the full mileage of any additional travel I do - so if you go somewhere from the office and return to the office, you only claim the additional, but if you go directly there, you claim it all - you are not obliged to use your car for work and the purpose of the allowance it to pay fuel cost and additional wear and tear on your car as a result of your employer asking you to use it for work. I am not sure what constitutes proof that a journey took place - I keep a record of my mileage in a book with start and finish odometer readings - in most cases it will correspond with a bill for client work, but we do do some internal commuting between "offices" as well.

Cheers R.

[G2JRP]

You do not need to deduct the home to office off any route any more. One of the few concessions given by the revenue!



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[Zed Carer]

With my last employer I didn't have to deduct home to normal office mileage (paid at 40p/mile). However we had to produce VAT receipts ( dated within 2 weeks of the date of the journey) to allow the company to reclaim VAT - really no different to other claimed expenses; i.e. no receipt = no payment.

[Robert T]

How do you claim VAT on mileage, Bill? As I understand it, you are paid for the miles you do, to cover cost of fuel and wear and tear on your car. It is almost impossible to apportion a bill for fuel to any particular journey, unless you use more than 1 tank (note that this is different for company cars, but that's not what we are talking about). If we should be doing this, then it would help the company, but I don't see how you can?

All other expenses we have to present receipts for (for the tax man as they can be audited). There is no profit in this for us, so there is no tax to pay on it (this is different if you are paid a subsistence allowance). It does still need to be declared though, and I was not amused recently when HMRC lost the form that stated were all reclaimable expenses... and sent me a bill for 8k!

Cheers R.

[Jonttt]

Re the VAT issue it depends on if the employing company reclaims the VAT or not on the mileage allowance paid.

HMRC allow companies to choose (or at least they used to).

[pingu]

I don't see how anyone can reclaim VAT on turnover they haven't turned-over.

Scenario

I travel 20 miles for work and put 60 litres in an empty tank. Company pays me £8 expenses. I pay £84 to fill my tank and give the receipt to my company who then reclaim £14 VAT. How can this be right?

[Zed Carer]

How do you claim VAT on mileage, Bill? As I understand it, you are paid for the miles you do, to cover cost of fuel and wear and tear on your car. It is almost impossible to apportion a bill for fuel to any particular journey, unless you use more than 1 tank (note that this is different for company cars, but that's not what we are talking about). If we should be doing this, then it would help the company, but I don't see how you can?

Cheers R.

It was about 2 years ago that we all got an email notifying changes (to be incorporated in the staff handbook) in claiming expenses that included making a VAT receipt compulsory. It covered the following categories:

1) Purchasing fuel for use in a vehicle hired by the company - we used to have a lot of one-day hires that had to be returned full.

2) Employees with company cars who had opted out of having a fuel card and were claiming for business mileage - not sure what the rate was for this (15p?) as it didn't affect me.

3) Employees in receipt of a car allowance and claiming payment for business mileage (40p rate) - to allow the recovery by the company of VAT on the fuel element.

Not sure what the mechanism was but presumably there is a standard figure agreed with HMRC for what proportion of the 40p relates to fuel - it could well be the same as the rate paid to the company car users in 2) above?

Each journey was claimed separately and a receipt dated within 2 weeks of the date a journey was apparently acceptable evidence that VAT had been paid on fuel and some of that fuel was used on that journey. If say I filled the Citroen up on a Monday and then did business mileage of 80 on Tues, 100 on Weds and 75 on Fri then the one receipt could be used to cover all 3 journeys.

[Zed Carer]

I don't see how anyone can reclaim VAT on turnover they haven't turned-over.

Scenario

I travel 20 miles for work and put 60 litres in an empty tank. Company pays me £8 expenses. I pay £84 to fill my tank and give the receipt to my company who then reclaim £14 VAT. How can this be right?

They don't - the company can only reclaim the VAT on the proportion of that invoice relating to the 20 miles - as in my response to Robert T the company used a proportion of the mileage rate agreed with HMRC. The only reason for having a VAT receipt is to provide proof that fuel was purchased and VAT paid and some of that fuel was used for business mileage say:
20 mile journey:
Paid to me £8
VAT receipt £84
Fuel only mileage rate: 15p
Fuel cost: £3 - VAT claimed on £3 and not on the £84.

[Robert T]

Cheers, Bill, that makes a lot more sense now. If there is a fixed rate for the fuel element of the allowance, then of course there is something you can calculate VAT on.

Cheers R.

[pingu]

Happy with that. I didn't know there was an HMRC agreed fuel only rate.

[Zed Carer]

Happy with that. I didn't know there was an HMRC agreed fuel only rate.

HMRC publish a set of Advisory Fuel Rates for company cars HERE that are used when a company car driver has to either a) claim fuel costs for business mileage; or b) reimburse the fuel cost of private mileage when the company has paid for all the fuel. For people taking a car allowance plus mileage payments then if agreed with HMRC they can also be used to deteremine the proportion of the 40p/mile that corresponds to fuel. To reclaim VAT you need a VAT invoice even though it is a notional cost that is being reclaimed. I did notice after a time that Tesco switched to automatically providing a VAT receipt whilst at other garages you specifically had to ask for one.

[pingu]

Happy with that. I didn't know there was an HMRC agreed fuel only rate.

HMRC publish a set of Advisory Fuel Rates for company cars HERE that are used when a company car driver has to either a) claim fuel costs for business mileage; or b) reimburse the fuel cost of private mileage when the company has paid for all the fuel. For people taking a car allowance plus mileage payments then if agreed with HMRC they can also be used to deteremine the proportion of the 40p/mile that corresponds to fuel. To reclaim VAT you need a VAT invoice even though it is a notional cost that is being reclaimed. I did notice after a time that Tesco switched to automatically providing a VAT receipt whilst at other garages you specifically had to ask for one.

A few notes about Tesco. Their "Pay at the Pump" receipts didn't always show VAT, and for about a month after the change to 20% they were showing a back-calculated 17.5% (Gross x 7 / 47) .

[Jonttt]

I think bill summed it up nicely. It's worth noting that for a routine vat audit the company only need show evidence of a reasonable procedure in place and there is just a small sample check. A company decides if it wants the hassle of reclaiming this vat or not ie for some companies I know it's not worth the extra admin and they either don't need receipts or they use fuel cards.

[Jonttt]

I don't agree with some of your points. If my company paid me £5 per mile I would get taxed on the difference to that allowed by HMRC. Although it is an expense claim there are limits before it becomes a taxable benefit otherwise it would be easily exploitable as a tax loophole.

[Jonttt]

Don't be so certain of that. We have cars that don't get much MPG and there used to be a loophole with personal lease cars which meant companies leased cars to employees who then officially worked from home. I knew people at a plc I worked for which had the largest fleet of Porsches in the country. Some employees effectively got paid to drive them even after tax.

[Jonttt]

For most companies yes, my point was that companies can pay whatever allowances they want to. They may or may not exceed those allowable by the tax man and anything above what he accepts as reasonable / within guidelines are likely to be treated as a benefit in kind and hence create a tax liability. Car mileage repayments fall into this catagory.

I have worked for several PLC which will pay more than the tax mans guidelines and hence the employees has a taxable benefit in kind. It is important you know what those guidelines are / your tax liability is as ignorance is no defence and tax evasion is a criminal offence.

For 99% of employees this is not an issue as companies pay the least they can get away with (for the reasons you outline above) which is usually less than the tax man would allow. Some of the comments above though were not technically correct and someone could have a tax liability they did not realise (me for example).

The most common problem is people being paid near the guideline rate which is not tiered for annual mileage by the employer (eg the taxman will allow x pence for the first y thousand miles and then it drops to z pence for every mile after that). Tends to be smaller companies which fall into this catogory with inexperienced payroll / finance staff. Larger companies tend to use software which is automatically updated and calculates the correct tax liability with any benefit in kind created added to the individuals year end P11D.

Now I remember why I stopped being an accountant 5 years ago lol