Use of HMRC Advisory Rates for VAT purposes

Where employers reimburse their employees for using their own cars for business journeys, the tax–free reimbursement rate continues to be 45p for the first 10,000 business miles and 25p a mile thereafter.  There is also an additional 5p per mile per passenger. These rates have not increased for about 10 years!

Provided the employee provides a fuel receipt from the filling station, the employer is able to reclaim input VAT on a portion of the amount reimbursed to the employee. The input VAT is 1/6th of the advisory fuel rate for the employee’s vehicle.  For a 2200cc diesel car, the input VAT would be 3.3p per mile based on 20p.

For more information, contact a member of our tax advisory team at js.tax@jsllp.co.uk.