Paying for private mileage in company car

bobcheese

Hi All,

Here is my question, I have started a new job and have been provided with a company car and fuel card. Now, I can use the company car for private use but I must log the mileage I do and am charged 18p per mile for private use. My company deducts this from my wage at the end of the month. The trouble is that they are raising an invoice through the company for this and adding 20% VAT on top of the 18p per mile! is this correct? VAT has already been paid on the fuel at the point of purchase and my company will reclaim the VAT on the business miles.

roger_c

I am pretty sure they shouldn't be charging you the 18p per mile on top, but you could ask them to check if that is right?

thenudeone

The business is only allowed to claim VAT back on business expenditure, not on fuel used for private use. http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm#6

hmrc sets up fixed "scale charges" for those businesses which provide fuel when some of it is for private use. Obviously this is an extra cost for the business.
Many businesses choose to pay the fixed scale charges rather than have to keep detailed records.

So AFAIK, a busienss has two options if it wants to avoid a fixed "scale charge" for allowing VAT-reclaimed fuel to be used for non-business use:
1) calculate how much of the fuel it's bought was for business use and how much for private use, and disallow the VAT on the private proportion (very messy to administer)
OR
2) charge VAT to you when it "sells" you the fuel you have used for private use. Then it can reclaim all of the VAT on the fuel receipts / invoices without having to pay a scale charge (much simpler to administer).

Your employer has chosen option 2. You can ask them to check, but it's probably correct.