Claiming VAT on Mileage

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Reclaiming VAT on Mileage


A question that often comes up is ‘can I reclaim VAT on mileage’? 
The short answer is yes.


An employee can use their own vehicle for business mileage and claim an allowance (without incurring further tax implications) up to HMRC’s approved rates of 45p per mile for the first 10,000 miles in the tax year, and 25p thereafter.


HMRC determine that an element of the mileage allowance relates solely to fuel.  This element is equivalent to HMRC’s advisory fuel rates, which can be found here
The advisory fuel rates vary depending on the engine size and fuel type of the employee’s vehicle, and tend to change every few months to reflect current fuel prices.


As a worked example say an employee travels 1,000 business miles in his 5.2L V8 Ford Mustang.  The advisory fuel rate for this vehicle is currently 20p per mile.  So to work out the VAT multiply 1,000 miles by £0.20 (to give 200) and then multiply by 20/120 giving a VAT amount to
reclaim of £33.33.


You will need to show HMRC on request VAT receipts that have enough VAT on them to cover the claim, so ensure that each employee attaches sufficient VAT receipts to each mileage claim.