Let FreeAgent calculate VAT reclaims on mileage

FreeAgent is packed full of great features. Did you know that it can also calculate the VAT you can reclaim on your mileage for you? Just remember to provide the correct vehicle information when entering your figures for all your fuel claims.

FreeAgent calculates the VAT by taking 1/6 of the advisory fuel rate for company cars multiplied by the mileage.

The current mileage rate of 45p/25p that most employees will use to claim back any mileage, is designed to cover the whole cost of owning and running the car. However, a business owner can only reclaim VAT on the fuel element of the mileage and not anything else.

Claiming VAT on fuel – a working example:

  • The customer puts in a journey of 50 miles in a petrol car with capacity over 2000cc
  • FreeAgent will calculate VAT at 50 x £0.21 / 6 = £1.75

HMRC requires you to keep copies of VAT receipts in order to reclaim input VAT on costs – the fuel receipt has to have the VAT number and address on, as all VAT receipts do.

HMRC accept that the amount of the invoice in many cases will not match the input tax claim in respect of business fuel in any one claim period and invoices may cover more than one period, particularly where fuel is purchased towards the end of a period.

Advice for employers

Clearly, a claim cannot be supported by a VAT invoice which is dated after the dates covered by the claim. This means, in practice, that it may be advisable for employers to arrange for their employees who use, or may use, their cars for business purposes to retain all fuel invoices. This will ensure that, at the end of the claim period, the value of business fuel is covered by an invoice.

Don’t forget electronic copies of the fuel invoices can be attached to the mileage claim within FreeAgent, so there’s need to keep paper copies.

If you would like Pillow May to help you with claiming VAT on fuel in FreeAgent, please contact Shelley, our cloud accounting specialist.


This article was put together with the help of FreeAgent’s Emily Coltman FCA

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