No doubt you’ll have noticed that petrol and diesel costs have increased recently. The taxman has noticed too, and increased some VAT and tax allowances for fuel costs, albeit not by a great deal.
Employers can pay a mileage allowance of up to 40p a mile, tax-free, when employees use their own car for business. That hasn't changed, it remains 40p.
You can’t reclaim VAT on all of the 40p, but you can reclaim VAT on the part that represents fuel, as long as you retain VAT receipts covering the cost. As fuel costs have increased so sharply, the approved rates - the part of the 40p that the taxman is happy to accept as representing the cost of fuel - have just been increased once more. The new list of rates is here:
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htmThe new rates are to be applied from 1 December.
The rates can also be used where someone has a company car but is required to pay for the fuel they use privately. Either:
- The employer can pay for all the fuel, then the employee can work out their personal mileage and reimburse the employer at the approved rates, or
- The employee can pay for all the fuel, then they can work out their business (not commuting) mileage and the employer can reimburse them for it at the approved rates.
So, not an exciting change, but every little helps - and if you're running a fleet of vehicles it may represent a meaningful saving.
And if you're VAT registered, not on the flat-rate scheme, and failing to reclaim VAT on your mileage costs at all, you should start! You can even reclaim some of the VAT you've missed out on in the past - get in touch with us to find out how.
www.fizzhq.com