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If you pay a mileage allowance to your employees for business journeys made in either their own vehicle or a company car, you can not only benefit from the tax allowable mileage expense, but you can also reclaim VAT on the fuel element of those mileage payments (assuming your business is VAT registered).

Mileage Allowance Expense Claim

The mileage allowance per HMRC for private cars is 45p per mile for the first 10,000 miles and 25p per mile for additional business miles driven in the same tax year. These rates are deemed to include an element of reimbursement for the vehicle’s other running costs. The mileage allowance for company cars is stated on the HMRC Advisory rates (below). For either situation, the good news is that the mileage allowance is a tax allowable expense.

Mileage VAT Reclaim

This is not the only tax relief businesses can obtain from a mileage claim - VAT registered businesses can reclaim a further amount from HMRC in input VAT on the fuel element of the vehicle.

To calculate the fuel only element, businesses should refer to the HMRC Advisory rates. The rates are renewed four times a year. You can use the previous rates for up to one month from the date the new rates apply. The new advisory rates are applicable from 1 March 2015 and are detailed below.


Engine size



1400cc or less



1401cc to 2000cc



Over 2000cc




Engine size


1600cc or less


1601cc to 2000cc


Over 2000cc



In order to reclaim the VAT component of the fuel element, firms should retain VAT receipts to cover the amount of fuel that is deemed to be used in the business journey. When an employee submits an expense claim for business mileage he or she must state the engine size of their car, or the band it falls into, and provide VAT receipts for the fuel purchased. It does not matter that the employee initially purchased the fuel rather than the business.


Ensure that you are claiming the maximum tax relief possible and enquire whether or not your business can reclaim VAT on mileage by contacting the team at Spirare.