VAT on mileage (fuel scale charge)

**Rebecca Loos** · 11 January 2006, 14:13

Ask for advice there

**freshblue** · 11 January 2006, 14:25

Ta. Will post any relevant feedback

**tim123** · 11 January 2006, 15:29

Originally posted by freshblue

My accountant has advised me that if I want to keep claiming the VAT elements of the mileage scheme then I have to start keeping VAT receipts for fuel. Seems the good old EEC have introduced some law and this is is the UK get out! I still get the 40p/25p for using my car so I only lose out by reducing my VAT bill. Amounts to not much (17.5% of the 12p per mile) overall but I hate handing over more than I need to the HMCR!

Anyone else had same advice? Came into effect 1/1/06.

A Dutch company lost a claim in the European Court several years ago. The Court rulled that companies could not reclaim VAT on expenses incurred by their employees, unless the receipt was in the company name.

This result cause some consternation (I had to check that I got that right to avoid Fleety correcting my spelling!) in several countries and there were various attemps to avoid it's implementation.

This new rule is a much delayed and waterer-down result of that legal rulling.

tim

**DaveB** · 11 January 2006, 16:39

Why not just go flat rate? No messing about with VAT reciepts etc and you save money in the process, assuming you dont have huge vatable expenses.

**freshblue** · 12 January 2006, 11:19

Flat rate as in VAT or mileage?

**ladymuck** · 12 January 2006, 12:54

Originally posted by freshblue

Flat rate as in VAT or mileage?

Why not both? It's all rather tedious that your mileage rate drops after x number of miles - your outlay and wear and tear on the vehicle doesn't change, so why should the mileage rate?

**DaveB** · 12 January 2006, 13:08

Originally posted by freshblue

Flat rate as in VAT or mileage?

As in VAT.

The basic idea is that you register for a flat rate of VAT that you pay to the tax man, anywhere from 6-13 % depending on how your company gets classified. You still charge your customers the full 17.5% but only pass on the flat rate value to the VAT man.

So if your flat rate is 12% on a £10000 invoice you charge :

17.5% VAT * £10,000 = £1750 which gives £11750 total.

You then pay the VAT man

12% * £10000 = £1200

and you get to keep the extra £550.

The down side is that you can no longer claim the VAT on your VAT'able expenses such as travel etc. As long as these are less than 10% of your turnover then you should still be ahead of the game and there is no need to keep VAT reciepts / accounts for your expenses etc.

If you decide to buy summat that costs more than the £2000 capital limit then you can still claim back the full 17.5%.

It will save me around £400 pm on avaerage.

As an added incentive you get an additional 1% discount on your VAT rate for the first 12 months after you sign up for the scheme as well.

more info <removed>

plus links to HMRC website for the full details and application form.

**SameOldStory** · 12 January 2006, 13:55

Originally posted by DaveB

As in VAT.

The basic idea is that you register for a flat rate of VAT that you pay to the tax man, anywhere from 6-13 % depending on how your company gets classified. You still charge your customers the full 17.5% but only pass on the flat rate value to the VAT man.

So if your flat rate is 12% on a £10000 invoice you charge :

17.5% VAT * £10,000 = £1750 which gives £11750 total.

You then pay the VAT man

12% * £10000 = £1200

and you get to keep the extra £550.

more info <removed>

plus links to HMRC website for the full details and application form.

check the example in your link.

you actually pay the VAT man

12% * £11750

not

12% * £10000

still looks good to me.

**DaveB** · 12 January 2006, 14:03

Originally posted by SameOldStory

check the example in your link.

you actually pay the VAT man

12% * £11750

not

12% * £10000

still looks good to me.

Yeah, my mistake

As you say though, still a good move.

VAT on mileage (fuel scale charge)