Can I reclaim VAT on business fuel costs?
If you are an employee and use your own vehicle for work travel, excluding your usual journey to and from work, you can reclaim some of the cost of fuel under the approved mileage allowance payment scheme, AMAP, and get part of your money back. Employers, employees and self-employed workers can all reclaim VAT incurred on fuel used for business purposes.
There are various factors to bear in mind that will affect the amount you are entitled to claim. HMRC considers a variety of points when assessing any claim you might make. You can work out how much you are entitled to claim by working through the following.
What can I claim?
As an employee using your own vehicle for business purposes, for example, travelling for visits to customer sites, or as a tradesperson visiting customers and suppliers for work, you are entitled to claim. Your mileage will affect the amount you can reclaim.
For the first 10,000 miles, you are entitled to claim up to 45 pence per mile, beyond this you can then claim 25 pence per mile. The 45 pence per mile consists of two parts, firstly fuel and secondly wear and tear. If an employer travels with employees in their vehicle, they can claim 5 pence per mile extra for each passenger that accompanies them on a work-related journey.
With VAT at 20% of the cost of fuel, a business can generally claim back 20% of the money spent on fuel for work purposes.
How do I claim?
Before you claim, ensure that you keep accurate records of any work-related travel you undertake.
Remember to include:
- Your mileage travelled on the journey
- The full addresses of your start and endpoints
- The purpose of your journey
- The date of your trip
- Passenger details
When claiming for passenger travel, remember that claims for passengers who are not employed by the same company will not be valid. Be careful to keep fuel receipts for all the trips you plan to claim for and make sure you specifically request a VAT receipt.
What can’t be claimed by employees?
The VAT paid on fuel used for personal journeys, even during work hours, cannot be reclaimed. Similarly, employees cannot reclaim the VAT paid on fuel used on their regular trip to and from their usual place of work.
Employer VAT claims
An employer can reclaim VAT on employees’ mileage if they are paying a mileage allowance to employees who use their personal vehicles for business purposes. The employer can only claim for the fuel element of the mileage claim, not the wear and tear component. An employer must not claim for freelancers or contractors, only employees.
Check the HMRC Advisory Fuel Rates, updated every quarter. These fuel rates are dependent upon the type of fuel used by each vehicle. Employers must pay the same rate to employees as they claim. HMRC guidance allows for multiple options when reclaiming VAT paid on fuel used for business purposes.
The four-year rule
The VAT paid on fuel used for business trips can be claimed for up to four years. If you choose to do this, bear in mind that HMRC will request receipts going back four years, so keep them somewhere safe.
To help keep track of receipts, consider issuing staff with preloaded bank cards. All cards come with an integrated app, enabling employees to instantly upload receipts by simply clicking and tapping to upload their fuel purchase receipts. At tax time, all costs are seamlessly integrated with your company’s chosen accounting software.
Different types of VAT reclaim
1. 100% fuel VAT reclaim
Some businesses can reclaim all of the VAT paid on fuel used for business purposes. To reclaim 100% of fuel VAT, you will need to prove that all the fuel was used solely for work purposes, and this can be challenging unless you work as a driver.
2. Claim business mileage only
To reclaim the VAT only on the proportion of fuel that you have bought and used for work purposes, you will need to keep accurate and detailed records of work travel and mileage. Using your records, you will be able to work out what percentage of your VAT for each fuel purchase you can claim. A more straightforward method is to check the HMRC guidelines and use the advisory fuel rates.
3. Fuel scale charge and 100% reclaim
If your company uses vehicles for a combination of personal and business use, you have the option of claiming 100% of the VAT paid on fuel, and paying a VAT fuel scale charge. The fuel scale charge is based on the type of vehicle and it’s CO2 emissions and is a simple way to tax the fuel used for personal trips.
Claiming back VAT where mileage is low is not always cost-effective. Auditors from HMRC can quickly identify companies who forget to pay their fuel scale charges or use out of date scales.
4. Claim no VAT
You can choose to claim no VAT, provided that you apply this consistently to all commercial and non-commercial vehicles in your business. If you decide to skip the complications and claim back no VAT, make sure that you are happy to apply this rule across the board.