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Reclaiming VAT on Car Mileage


Lots of people use mileage rates to claim for expenses incurred when using their personal cars for business purposes.

HMRC guidelines say that you can claim 45p per mile for the first 10,000 miles in a tax year followed by 25p a mile for any subsequent miles (motorbikes can claim 24p a mile and bicycles 20p a mile).

But did you know that VAT registered businesses can reclaim VAT on some of this expense?

Although the rate is intended to cover wear and tear as well as actual fuel costs, HMRC accept that some of the cost included in the overall figure relates to fuel and that fuel has a VAT element to it.  This means that provided you keep fuel receipts, you can reclaim the VAT on the fuel portion of the mileage rate.

To know how much this portion is you need to use the Advisory Fuel Rates published by HMRC which can be found here.

These rates tell you for a given fuel type and engine size, how much of the mileage rate HMRC consider to be for actual fuel.  These rates can change monthly as the cost of fuel changes, so you need to refer to them on a regular basis to ensure you have an up to date figure.

For example, if HMRC consider that for your fuel type and engine size the advisory fuel rate is 12p, then you can reclaim 2p per mile in VAT.

Any questions?  Contact us and we’d be happy to help!

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