Specialist Tax News

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 2,200 cc diesel car the input VAT would be 3p per mile based on 18p.