Navigating the world of mileage claims, fuel receipts and vehicle maintenance can seem complicated. We often get asked about how to claim, what can be claimed for and how it needs recording. So, we have put together some useful information and tips to explain it all.
If you are required to use your own vehicle or company vehicle for work, you may be able to claim Mileage Allowance Relief from HMRC based on the number of business miles you travel. This tax relief could be worth up to 45p for every mile you have travelled since April 2011!
Claim up to per mile
Are you Self Employed?
Calculate your car, van or motorcycle expenses using a flat rate for mileage instead of the actual costs of buying and running your vehicle, eg insurance, repairs, servicing, fuel. Quite simply, business mileage is any mileage you incur in fulfilling the duties of your job. It does not include travel from your home to your permanent place of work.
Note – You can’t claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits.
Approved mileage rates from tax year 2011 to 2012 to present date:
From tax year 2011 to 2012 onwards
First 10,000 business miles in the tax year
Each business mile over 10,000 in the tax year
Cars and vans
You’ve driven 11,000 business miles over the year in your car.
10,000 miles x 45p = £4,500
1,000 miles x 25p = £250
Total you can claim = £4,750
The 45p per mile allowed by HMRC allows for an element of wear and tear on the car, insurance, tax, tyres and general repair costs. Assuming your company can afford it claiming the 45p per mile will always be more financially beneficial to you. This is an effective way of extracting profits from your company as the full cost of the mileage claim is allowed for tax.
Can I claim VAT on my mileage?
Yes, but this can become very complicated…..
- you CAN’T claim VAT on the full 45p per mile (which includes a contribution towards your MOT, car tax ,tyres and insurance etc)
- you CAN claim VAT on the fuel element itself
Again HMRC publishes rates, called Advisory Fuel Rates – on which we are allowed to reclaim VAT. These are updated each quarter.
Passenger payments – cars and vans
5p per passenger per business mile for carrying fellow employees in a car or van on journeys which are also work journeys for them. Only payments specifically for carrying passengers count and there is no relief if you receive less than 5p or nothing at all.
Are you Employed?
If you are driving a company car, it’s likely that the fuel costs are covered by your company and you are paying a taxable benefit in kind on the fuel. You don’t need to separately claim for fuel costs – you may however want to record personal mileage and repay that to the company so that you don’t get taxed on the benefit in kind. We know what you’re thinking – you’re busy! Right? Although you really mean to keep good records – sometimes you are just too busy to be working out the exact mileage of where you’ve travelled to and from in relation to your business.
So can you just claim for the odd tank of fuel instead? In short. No.
As an employee of your company you are only allowed to claim mileage at the approved mileage rates published by HMRC. These are called Mileage Allowance Payments or MAPs.
You may be able to claim tax relief on fuel or electricity you use on business. What you can claim depends on whether you’re using your own or a company vehicle.
You can’t claim for travelling to where you work, unless it’s a temporary place of work.
HMRC has clear rules for claiming mileage expenses. At the time of writing, you are allowed up to 45p per mile tax-free for every business mile you travel in your personal car.
- 45p for the fist 10,000 miles travelled
- 25p for every mile thereafter
Unless you can prove that you used the full tank of fuel that you purchased with your fuel receipt for business miles, say for example you put a tank of fuel in a hire car, or perhaps the car is parked at the business premises and is never used for personal mileage – then you cannot claim for the fuel receipt. If you cannot prove that you only used the car for business then HMRC will assume that there is a level of personal benefit in the tank of fuel you’ve claimed and you will be taxed on it. Better that you calculate your actual usage than HMRC assume your usage – this will never be calculated in your favour!
If the company is reimbursing personal expenses on fuel or paying rates above the published MAPs rate of 45p per mile then this must be recorded in a P11D as a benefit in kind and taxed accordingly.
To avoid the whole debate of how many personal or business miles you may or may not have travelled in your car you must record actual business mileage.
The onus is on you to prove your mileage to HMRC – it is not up to HMRC to disprove the mileage. In the event of an audit they will simply disallow the spends and charge you for any unpaid tax – plus interest and penalties of course!
Using your own vehicle
If you use your own vehicle for business, you may be able to claim ‘Mileage Allowance Relief’. To work out how much tax relief you can claim, add up your business mileage for the tax year and multiply it by the approved mileage rates.
– If your employer doesn’t pay you a mileage allowance you can claim the full approved amount of Mileage Allowance Relief.
– If your employer pays you a mileage allowance but it is less than the approved amount, you can claim Mileage Allowance Relief on the difference.
– If your employer pays you more than the approved amount you’ll have to pay tax on the difference
– You must keep records of the dates and mileage of your work journeys.
Using a company car for business
You can claim tax relief on the money you’ve spent on fuel or electricity for business trips in your company car. Keep records to show the actual cost of the fuel or electricity you’ve bought or used.
If your employer reimburses only some of the money, you can claim relief on the difference.
Top Tips for mileage tracking
Keep Fuel Receipts
Although you are allowed to recover the VAT on fuel claims, you must still prove to HMRC that you actually bought fuel during the claim period.
Although you won’t enter them into your system – you must keep copies of VAT fuel receipts with enough VAT to cover the claim you are making, with your accounting record s . If you use Xero, you can scan these alongside your mileage claim.
Maintain Adequate Records
Keep sufficient records to evidence your business trip:
- Start and end postcodes – to prove mileage
- Date and times of business meetings
- Name of the person/company you were going to see
- Purpose of the business trip
- Who you took with you – you can claim MAPs for passengers in your car
It might seem like a lot of effort, but the better your records are now – the easier it will be to defend any kind of challenge in a VAT audit later.
Keep your diary
Keep records of all appointments and journeys in your diary just in case you need to refer back later. We use or CRM system Capsule, do capture all our diary and client visits.
Use beautiful accounting software, Xero, to early track your milage
Use the expense claim functionality – you could log each trip as an expense claim and submit it for payment at the end of each month.
Make use of apps on your smartphone
Download an app onto your phone such as TripCatcher and log your mileage as you go. If you use Xero, you can submit your mileage claims directly to your Xero account.
If you need further help or have questions on mileage and vehicle claims, we’d be happy to help. Perhaps we can help organise your accounts with a free month of Xero? Get in touch to organise a free of charge consultation. Drop us an email email@example.com or give us a call 01858 289189
Thanks for stopping by,