Mileage VAT calculations have been designed to work using the HMRC rules when claiming back VAT on a business journey, this means the system calculates VAT based on the fuel rate and not the mileage rate.
E.g. Where a 20% VAT rate is assigned to the fuel rate, 20% VAT will be calculated on this rate, and not 20% of the mileage rate paid to the end-user.
Note: It's recommended that the "Personal/Company car mileage must have a receipt" policy rules are enabled in your expense policy to ensure your users attach a valid fuel VAT receipt to their mileage expenses.
If you're using custom fuel rates, please check the HMRC guidance for claiming back VAT.
How the fuel rate is determined on an expense
How the fuel rate is determined on an expense depends on the type of mileage expense being created:
Personal car mileage expenses - the fuel rate is determined by the Vehicle Details selected by the user when creating a personal car mileage expense.
Company car mileage log expenses - the fuel rate is determined by the Vehicle Details an Account Administrator has assigned to the user's company car in the Admin area, or the Vehicle Details the end-user has assigned to their company car if the setting is enabled to allow them to manage their own vehicles.
How to enable Calculate VAT for mileage
To set up your account for calculating VAT on mileage expenses, follow the steps below:
1. Click the Account Name > Admin.
2. In the Rates section, click the Mileage and Fuel Rates subheading.
3. In the top table, click the Edit icon next to the mileage rate you'd like to calculate VAT for, or click the three dots icon and select Edit from the drop-down.
4. Tick the Calculate VAT checkbox and then click Update.
5. In the bottom table, click the Edit icon next to the required fuel rate(s), or click the three dots icon and select Edit from the drop-down.
6. Assign the relevant VAT Rate to the fuel rate, E.g. 20%.
7. Click Update.
8. Repeat the above steps for each mileage rate and fuel rate you require VAT calculations on.
Once completed you should find your Mileage and Fuel Rates tables look similar to the below.
