Often, I incur business mileage incurred on client business (which is charged on to clients). The VAT treatment has me a bit confused, including how to fill in my VAT return.
On the sales side, I think I am OK - I charge out my mileage to the client and add VAT to that part of the invoice in the normal way.
However, on payment to myself, I don't know how to treat the VAT.
My working assumption is that I am simply re-imbursing myself at the appropriate rate (40p), without any VAT records.
Assuming so, when I do my VAT return, do I include the cost of reimbursed mileage in the 'total purchases' box?
the two parts to this actually seem quite divorced from each other.
First the mileage that you pay yourself. 40p per mile for the first 10k, 25p per mile thereafter. You are able to claim an element of VAT on this but people seldom do as only part of the 40p/25p is deemed to be towards fuel and the rest is down to things such as wear and tear and depreciation on your car which have no VAT element.
If you do go down this path then for the actual fuel element see the HMRC page :
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm which will give you the correct rate for your car.
There's a line at the bottom of the page that if you reclaim VAT then you must retain VAT invoices to support such claims. However, the VAT that you reclaim on the mileage would not relate to the VAT on the receipts... Is it surprising then that few people bother with the VAT element and just take the 40p / 25p.
On the second matter about the amount that you are paid by the client.
The client seems to be treating the expenses as an extension of your fee's and for simplicity I personally would treat it as such.
If you are paid VAT by the client then you are only collecting it on behalf of HMRC and it must be paid over in full minus legitimate deductions at the end of each quarter.
To treat this as mileage related would not calculate out properly as only around 11p of the 40p relates to petrol.
For the above reason it would be better to treat it as an extension of fee's which will result in you still paying HMRC the correct amount of VAT and also paying the correct mileage rates to yourself which just happen to relate to the extension of fee's.
I'm sure that if anything is amiss with my simplified treatment of the situation Rob and Bill will fill out the gaps.
Hope that this helps,
Shaun.
P.S. Note that this route will not result in higher tax liability as the additional payment is related directly to a legitimate expense so it would just come in and go out. The VAT was never yours in the first place so you owed that money to HMRC anyway. Sorry, just reread the note and realised that I had missed that bit out.
-- Edited by Shamus on Tuesday 11th of May 2010 08:37:58 AM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
So the only remaining question I have is whether or not I should include the amount paid to me (at the correct mileage rate) as part of the 'total purchases' box in my VAT return?
if you are claiming the VAT element then yes otherwise I would treat it as per salary and pension expenses and leave it off all together.
The full amount received from the client must however be shown in sales.
Note that you must keep a log of all business mileage done. Most people keep a small A6 book in the car with columns for date, journey details including reason for journey, total mileage.
For anyone else reading this interested in this topic have a read of HMRC Reference notice 700/64 which can be found at
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
