How this works: HMRC approved mileage rates cover all vehicle running costs. For VAT purposes, only the fuel element (calculated at HMRC Advisory Fuel Rates) carries reclaimable VAT. Wear and tear, insurance, depreciation etc. are not VATable. A VAT receipt for fuel must be held.
Total fuel element
—
Miles × HMRC advisory fuel rate
Gross fuel cost (inc. VAT)
VAT reclaimable
—
1/6 of gross fuel element
Input tax to reclaim on VAT return
Net fuel (ex-VAT)
—
Fuel element after VAT extraction
Non-VAT expense in accounts
ElementAmount
Fuel element (gross)—
Less: VAT (1/6)—
Wear & tear / other (non-VAT)—
Total (reconciles to allowance)—
Record keeping: A VAT fuel receipt must be retained to support the VAT reclaim. The receipt must cover at least the fuel element of the claim. HMRC reference: VAT Notice 700/64.
