New Regs For Employees Claiming Mileage (Contributed)

IN essence, employers WILL require fuel receipts for mileage claims in future, even if the claim is on a pence per mile basis.
Business Brief 22/05, issued by HMRC on December 1, 2005, describes the new arrangements for recovery of VAT by businesses on road fuel purchased by their employees on their behalf.
Essentially, employers will be able to continue to treat as input tax the VAT incurred by their employees on fuel costs that are subsequently reimbursed by the employer, either on the basis of actual cost of the fuel or by means of a mileage allowance. However, after January 1, this year, the business must hold a VAT invoice or invoices showing sufficient VAT to cover the input tax claim. Normally, there will not be an invoice showing exactly the amount of the input VAT claimed because often some of the fuel will be used by employees for private purposes and reimbursement will usually be based on a fixed amount per mile.

New legislation to take effect on 1 January 2006 will ensure that VAT can only be claimed where the fuel is used for business purposes and is attributable to taxable outputs. There will be a requirement to hold a VAT invoice. HMRC have confirmed that relief will not be denied on the grounds that the fuel is actually supplied to the employee and the VAT invoice is in the name of the employee and not the business.

There will be instances when the fuel purchased within a certain period does not correspond exactly to the cost of the reimbursed business fuel. This could arise, for example, where fuel is purchased in one VAT period but is not fully used until a subsequent period. HMRC accept that some invoices may cover more than one claim and will take this into account in checking the evidence to support claims.