VAT and per-mile expenses

[Tom]

My Ltd Company has just become VAT registered. I use a private car for company business, and previously my Ltd Company charges the client e.g. 40p per mile, 100miles =£40. As the sole employee I then passed on this expense direct to myself, with no thought for VAT. Is this affected? - can I continue to do the same or is it now a service supplied and should I add VAT to it, and charge £117.50. If so how does this work with reimbursing the expense from the Ltd Company to myself etc. PS I am outside IR35.

[Emperor Dalek]

Yes, YourCo must add VAT to the total of value of the invoice, including any expenses that appear on it [and pass it on to HMCR at the appropriate time, of course].

The arrangement for YourCo reimbursing you is, of course, a matter between you and YourCo. I take it you yourself are not VAT registered and will not be charging YourCo VAT?

[martinb]

My Ltd Company has just become VAT registered. I use a private car for company business, and previously my Ltd Company charges the client e.g. 40p per mile, 100miles =£40. As the sole employee I then passed on this expense direct to myself, with no thought for VAT. Is this affected? - can I continue to do the same or is it now a service supplied and should I add VAT to it, and charge £117.50. If so how does this work with reimbursing the expense from the Ltd Company to myself etc. PS I am outside IR35.

My understanding....

If you invoice the travel expense to your client you invoice £40+VAT (assuming 100 miles @40p per mile)

Reclaiming the expense from YourCo to yourself is more complicated. The 40p per mile includes costs that are intended to cover insurance, depreciation etc as well as fuel. ONLY the fuel element of the 40p is subject to VAT. The fuel element is dependant on your engine type (petrol/diesel) and size. (See here http://www.hmrc.gov.uk/cars/advisory_fuel_archive.htm for rates)

For a 2000cc petrol car the fuel element is 12p (of the 40p mileage allowance). So, 28p has no VAT related impact and the 12p is VAT inclusive - ie 10.2p of fuel and and 1.8p of VAT.

In summary in the above example - 1.8p of the 40p per mile is VAT.

[Pondlife]

YourCo charges travel expenses at the rate agreed with the client + VAT.

You can claim mileage back from YourCo at a rate of 40ppm for the 1st 10,000 and then 10ppm thereafter.

The + VAT bit obviously goes to HMRC - See other threads about the flat rate vat scheme which is ideal if you don't have many VAT reclaimable expenses.

[Tom]

Thanks

Thanks for the replies everyone

[dmini]

There is one other little bit I believe. Part of the 40p/mile you get back is VAT.
If you are flat rate VAT, then according to my accountant you don't need to do anything else!
If you are not, then check with your accountant. It will almost certainly involve you collecting VAT receipts for fuel, and passing them to your company!

[VectraMan]

Not sure if client rechargable expenses differ, but for schedule E I count 2p per mile in VAT (as I've been told to do by my accountant). It means getting and keeping petrol VAT receipts of at least the amount of VAT you're claiming for. No problem in my 25mpg car, but if you have a diesel I imagine you might not have enough to cover that.