Travel costs/fuel

[ASB]

There is also a question as to whether it is worthwhile claiming from the company at all.

If you don't you can claim the difference between the AMAP rate of 45p/25p and what is actually paid against your gross income via SATR.

It is possible in a few cases that this yields a greater saving than the saving the company may make on it's CT.

If you are outside IR35 and a non basic rate taxpayer it may yield a modest saving if you income is predominantly from dividends.

Whether it is worth the time and effort is a different matter.

[Snarf]

OP has it right. They claim the mileage back from the company. The company claims the VAT on the mileage expenses. Quick calc is to take the advisory fuel rate and multiply it by the mileage claim. The VAT element is 1/6 of this. If you're looking for a formula it's (AFR x mileage)/6 = VAT element.

In Xero, create a bill for mileage using two lines. The first line is the AFR as the unit price and the quantity is the mileage. Apply the tax rate as 20% VAT on expenses.

The second line is the non VAT element with a tax rate of NO VAT.

Thanks for confirming, that's what I had been doing but the next text on the gov site made me question it!

I'm only doing 600miles a quarter at the moment so it's not a large amount, but I was doing 600+ a week before lockdown so if I'd been doing it wrong it would have been a bit of a mess to fix!

[Craig@Clarity]

OP has it right. They claim the mileage back from the company. The company claims the VAT on the mileage expenses. Quick calc is to take the advisory fuel rate and multiply it by the mileage claim. The VAT element is 1/6 of this. If you're looking for a formula it's (AFR x mileage)/6 = VAT element.

In Xero, create a bill for mileage using two lines. The first line is the AFR as the unit price and the quantity is the mileage. Apply the tax rate as 20% VAT on expenses.

The second line is the non VAT element with a tax rate of NO VAT.

[malvolio]

It's sa tiny amount anyway, but I always took the view that since I am reclaiming the mileage costs personally - on the not unreasonable basis that it's my money paying for it all, not the company's - then I am not VAT registered so can't reclaim any VAT anyway. And since the annual recoverable VAT in my case was around £480 a year but I got all my costs* back into my bank account, and since the VAT charged on my services to the client were well above that level so I was returning it all to the revenue, I wasn't really bothered anyway.


* Come to that, fairly recent RAC figures put the cost of a car like mine at £0.65 a mile anyway...

[Maslins]

So back to the question, are we saying that the rates on that page are the correct ones to use when working out how much of the 45p the ltd should be able to claim tax back on?

Yes. I think HMRC's commentary re it only being for company car owners is just to avoid less well informed people with personal cars mistakenly only using those lower figures for the total reclaim, rather than the 45p.

[eek]

Yeah fairly sure, Xero doesnt seem as well suited for contracting as Free Agent, but at this point its probably too late to change (Plus my accountant supports xero, might not with FA).

So back to the question, are we saying that the rates on that page are the correct ones to use when working out how much of the 45p the ltd should be able to claim tax back on?

Hardly surprising given that Xero is a New Zealand based accounting software that won't have any understanding UK nuances...

[Snarf]

Ah, sorry, then I think you're fine. I misunderstood your OP. Yes I think those lower rates (the 10-20p/mile advisory rates) can be deemed the fuel element of the 45p/mile for VAT purposes. Are you sure Xero doesn't have a widget that does all the calculations automatically for you like FreeAgent does?

Yeah fairly sure, Xero doesnt seem as well suited for contracting as Free Agent, but at this point its probably too late to change (Plus my accountant supports xero, might not with FA).

So back to the question, are we saying that the rates on that page are the correct ones to use when working out how much of the 45p the ltd should be able to claim tax back on?

[Maslins]

Ah, sorry, then I think you're fine. I misunderstood your OP. Yes I think those lower rates (the 10-20p/mile advisory rates) can be deemed the fuel element of the 45p/mile for VAT purposes. Are you sure Xero doesn't have a widget that does all the calculations automatically for you like FreeAgent does?

[Snarf]

Snarf you're confusing rates payable to company car owners with those who own cars privately. The 45p/mile you're thinking of is the latter. I'm not that familiar with Xero, but hopefully you can find a separate option somewhere else to pay you the higher rate appropriate for where it's a personally owned car.

The key difference is that the company car one is JUST reimbursing the fuel. Reason being the company is typically already suffering the other costs relating to the car. With the personal one the 45p/mile is deemed to cover not only the fuel but also contribute towards all the associated costs of owning a car. As most of the latter are non VATable, being things like insurance and depreciation, that's why you can only reclaim VAT on a proportion of the 45p/mile, rather than the entire 45p. FreeAgent does all the donkey work for you based on you advising what engine size and fuel type the car is.

Hi,

Thanks for the input, I dont think I'm confusing the two, maybe just didnt word the original question well enough.

To be clear - I personally am claiming back 45p a mile from my ltd.
BUT then my LTD is claiming the VAT back on the fuel component of that 45p.

The reason I am asking the question is the gov.uk page that I normally get the advisory fuel rates from now has this text at the top "These rates only apply to employees using a company car."

So I guess my question is, Where do I find out how much of the 45p is for fuel so I can claim the VAT back on it? because this page https://www.gov.uk/guidance/advisory-fuel-rates claims not to be the right one any more.





Honestly it's such a low amount I might just not bother with the VAT its already taken longer than I'd like, I might just pay myself the 45p and not bother with the LTD claiming the VAT back.

[Snarf]

That reads to me like the company can reclaim VAT on a proportion of the 45p/mile paid for use of a personal car? That's something I never considered as possible. Have I completely mis-read that?

No, that was my understanding and what I was doing prior to covid.
I get 45p a mile from my ltd to cover the cost of fuel & wear 'n tear on the car
My ltd (being VAT registered) can then claim back the VAT on the fuel component of the 45p using the advisory rates here https://www.gov.uk/guidance/advisory-fuel-rates HOWEVER when I last did this the bit at the top of the page that says "These rates only apply to employees using a company car." was not there which is what prompted my question Because I have always personally claimed the 45p a mile for use of my car and then my co has always claimed the VAT back on the fuel component.

[JHamp82]

If the car is owned by you personally then you can only claim 45p per mile from your company for first 10,000 miles and 25p per mile thereafter. If your company is VAT registered and on the standard rate then 'your company' can claim VAT on these claims. Not sure about Xero but in FreeAgent you just have to tick a box and it does all the magic for you.

[ladymuck]

Snarf you're confusing rates payable to company car owners with those who own cars privately. The 45p/mile you're thinking of is the latter. I'm not that familiar with Xero, but hopefully you can find a separate option somewhere else to pay you the higher rate appropriate for where it's a personally owned car.

The key difference is that the company car one is JUST reimbursing the fuel. Reason being the company is typically already suffering the other costs relating to the car. With the personal one the 45p/mile is deemed to cover not only the fuel but also contribute towards all the associated costs of owning a car. As most of the latter are non VATable, being things like insurance and depreciation, that's why you can only reclaim VAT on a proportion of the 45p/mile, rather than the entire 45p. FreeAgent does all the donkey work for you based on you advising what engine size and fuel type the car is.

That reads to me like the company can reclaim VAT on a proportion of the 45p/mile paid for use of a personal car? That's something I never considered as possible. Have I completely mis-read that?

[Maslins]

Snarf you're confusing rates payable to company car owners with those who own cars privately. The 45p/mile you're thinking of is the latter. I'm not that familiar with Xero, but hopefully you can find a separate option somewhere else to pay you the higher rate appropriate for where it's a personally owned car.

The key difference is that the company car one is JUST reimbursing the fuel. Reason being the company is typically already suffering the other costs relating to the car. With the personal one the 45p/mile is deemed to cover not only the fuel but also contribute towards all the associated costs of owning a car. As most of the latter are non VATable, being things like insurance and depreciation, that's why you can only reclaim VAT on a proportion of the 45p/mile, rather than the entire 45p. FreeAgent does all the donkey work for you based on you advising what engine size and fuel type the car is.

[ladymuck]

How are you applying VAT to the 45p per mile? You as an individual are not VAT registered so cannot charge VAT to yourCo for the mileage, so yourCo cannot account for any VAT element as it won't have been charged.

That in itself sounds extremely dodgy.

I don't know which link in the HMRC manual you were looking at, but for repaying mileage on use of a personal car, you should be referring to this:
https://www.gov.uk/expenses-and-bene.../rules-for-tax

[Snarf]

I have a question, I need to reimburse myself for fuel, I have a privately owned car which I have used for business travel over the last 6 months, its just shy of 2k miles so not a massive amount but also not nothing.

In the past when doing this I would create a bill in xero payable to me, with two lines on it, one for the vatable component of the 45p and one for the non vatable component using the advisory fuel rates from HMRC. This means that I personally get the 45p per mile and the company correctly (or so I thought) records the VAT paid for VAT returns.

Its been a while since I did this because I have not been traveling much, Ive just been on to check the advisory fuel rates and spotted this new text at the top of the page:

When you can use the mileage rates
These rates only apply to employees using a company car.

Use the rates when you either:

• reimburse employees for business travel in their company cars
• need employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

So have I been doing it wrong? Its not a company car so is the process different?