How best to handle UK motoring expenses
HM Revenue & Customs has various rules about how you should process your employees’ business mileage when they visit prospects or clients and attend events, whether they use company or private cars. Zetadocs Expenses helps you keep on top of P11D issues for business mileage and calculates the VAT on fuel used for it that you can recover. If you’re currently using spread sheets or paper for this, then read on. Life is easier when Zetadocs Expenses can help out!
For company cars where the driver pays for fuel, the rate a company pays for business mileage is typically pegged at HMRC’s “advisory fuel rates”. VAT on fuel can be recovered at those rates, providing receipts are kept. Staff can use Zetadocs Expenses to record business mileage and capture those receipts electronically.
Fuel cards for company cars are a common alternative. But these days, few staff seek a fully expensed car as the personal tax liability is punitive unless they do lots of private mileage. If their employer pays for fuel, it’s usually cheaper for them to pay back the fuel used for private mileage. That private mileage charge needs calculating and the business can only recover the VAT on the rest of the mileage. Those calculations are done for you by Zetadocs Expenses.
Most companies pay a mileage allowance at HMRC’s “approved mileage rates” for staff to use their own cars for business travel so that there’s no tax implications. That’s 45p/mile for cars and vans, dropping to 25p/mile after an employee claims 10,000 miles in a tax year, whether it’s in one vehicle or more. That needs tracking and calculating for each employee. The VAT you can then recover from paying for that business mileage is a little trickier to work out. It depends on the vehicles driven and the cost of fuel. As a result, you may not be bothering to reclaim it. But you should: expense management software such as Zetadocs Expenses can handle all this for you.
If you pay a car allowance and lower mileage rates, such as HMRC’s “advisory fuel rates”, then you may want to join the Mileage Allowance Relief Optional Reporting Scheme (MARORS) scheme to help your staff minimize the tax they pay. Those rates and the cars driven will affect the VAT calculations. Again, it saves time to have the VAT work done for you.
When you offer a car allowance and pay for fuel, VAT tracking gets easier. But you will probably want a system to help charge your staff back for their private mileage at those advisory fuel rates and prove to HMRC that the rest was legitimate business mileage. Zetadocs does this, too.
Read more about how Zetadocs helps reclaim VAT for motoring in a separate blog entry here.