How Can Businesses Claim VAT Return On Motoring Expenses

You have a vehicle and you use it for work, which is why you want to put it under the expenses incurred for your business. Simple, isn’t it?

Well, if truth be told, it is not. Travel and specifically vehicle motor expenses are more intricate as compared to your ‘satellite-navigation’ instructions on a terrible day. But, don’t you worry! To help your business drive through, we at Northants Accounting have put together a guide on claiming VAT return on motoring expenses.

But, before we get into the nitty-gritty, let us tell you that your vehicle is considered to be used 100% for your business, if:

  • It’s a driving school vehicle
  • You’re running a car hire company
  • You’re purchasing a van

However, what is it that you can make a claim on?

Well, for that you need to begin with answering the “why” behind the vehicle being used and then figuring out if it actually is a business expense. This might sound easy, but in reality it isn’t. Your motoring expenses are going to be somewhat different based on a specific situation and how you’re managing it.

Your normal travel to work won’t be counted as an expense, but you’re surely entitled to include mileage that’s exclusively related to business. This doesn’t necessarily include travel that you provide your customers with; it could be anything from a trip to buy equipments or materials to travel for your accountant.

Once you’ve figured out what can be counted as business expense, it’s imperative to have proper records in order to make a claim.

Now that we have covered the “what” and “why”, let’s talk about “how” you can claim it. Basically, there are two ways of claiming vehicle expenses; one is the full cost method and the other is the mileage method.

Full Cost Method

You can use this method to claim motoring expenses, provided your vehicle is solely being used for business purposes. Not to mention, if you’re using this method and claiming capital allowance as well, then we must tell you that the vehicle belongs to your company.

As an employee, you must be using it for business trips. To put it simply, if the vehicle is used for personal reasons, it’s known as “benefit in kind” and the expenses would be subject to personal tax return.

So, think before getting a vehicle for your company and applying the full cost method to claim VAT. Ensure that it’s being treated as a business vehicle only and not used for anything personal.

Mileage Method

By using this method, you’re not only ensuring that the vehicle is considered to be a part of the business, but  also  claim mileage allowance for the business trips you take. The mileage rate is intended to account for the expenses of purchasing, using and maintaining the vehicle such as oil, repairs, servicing, vehicle excise duty, fuel and MOT.

However, if you’ve already claimed for the expenses through capital allowance, then you aren’t allowed to use this method, in fact you’ll have to stick to the ‘full cost method’.

Mileage method is considered to be the best way to claim VAT on motoring expenses, provided you’re using it for both personal as well as business trips. But, all of this depends upon how well you keep a record of it.

To sum it up, it is worth consulting your accountant or checking your VAT returns to ensure that you’re being as efficient as possible when it comes to reclaiming the expenses.

To find out more about this, get in touch with us today!

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