BIM31550 - VAT: private motoring

Re:BIM31550 - VAT: private motoring

Do you mean that your client is charging the business 40p per mile as an expense for using her own car, if so then ensure she completes a mileage log then Dr travel exp and Cr bank/drawings (cash withdrawn/no cash taken).
The BIM31550 is for a company car which is used for private motoring funded by the buisiness. It is an adjustment for all the input claimed on fuel of which a proportion is private use. The scale charge credits the vat account and debits motor exp.
Hope this helps

Re:BIM31550 - VAT: private motoring

Hello, vat does not enter into the 40p, it ia a max. allowance given by Revenue and Customs to cover the cost of using your own vehicle for business.

Yes, the fuel scale charge is just for company vehicles.

Don't forget that it is 40p for first 10000 miles then 25p thereafter any increase in this charge should be declared in their self assessment. The client must also have vehicle business insurance.

Re:BIM31550 - VAT: private motoring

I thought that if you're claiming 40p per mile then you can claim VAT on about 13p per mile (depending on type of car) of that. ie you can claim the vat on the portion relating to petrol but not to the wear & tear element.
Is that wrong?

and the fuel scale charge only applies when you're claiming VAT on petrol bought for private use, so if you're claiming the 40p per mile then it doens't apply.

Re:BIM31550 - VAT: private motoring

Had a word on the phone with HMRC today and they have clarified that there are the following 4 options with VAT. However I still have a few questions:

OPTIONS:
1. Claim all VAT back because all journeys that are business journeys
2. Claim back all VAT on private and business journeys and pay a fuel scale charge
3. Keep detailed mileage records of both personal business journeys and claim back the VAT on the business journeys only.
4. Claim back no VAT at all

In all circumstances you must keep fuel mileage 'diarys'and for all options keep fuel receipts.

Option 2.
Claim back the VAT on all journeys as input tax, and pay a quarterly Fuel Scale Charge. If you use the scale charge, you can claim back all the VAT charged on road fuel without having to split your mileage between business and private use.


So for instance
You travel 100 miles @ 40p/mile
Dr Travel Exp. £40
Cr Bank £40

Then take all fuel receipts and claim back the input VAT, let’s say it’s £300.
Dr VAT £300
Cr WHERE?

And then the fuel scale charge
Using Notice 700/64 Section 9
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&id=HMCE_CL_000090&propertyType=document
Say it’s a petrol 1400cc
Dr Travel Exp. £40.66
Cr VAT £40.66 (and add to VAT return)
What do you do with the £273 ? Is this another charge or it just the £40.66 you have to pay?

Option 3.
Keep a record of all business AND personal mileage and work out the fuel element of the business miles and reclaim the VAT on this fuel only. No fuel scale charge is payable with this method.

If for example, your records show that the total mileage is 4290miles, of which 3165miles is business mileage, and the total cost of the fuel is £250:

The cost of the business mileage is; £250 x 3165/4290 = £184.44
The input tax is £184.44 x 7/47 = £27.46

Say you do 3165 miles at 40p/mile = £1266:
Dr Travel Exp. £1266
Cr Bank £1266

Then using above calc for VAT:
Dr VAT £27.46
Cr Where?

Do you do this as a journal entry?
Won’t it make the VAT account out of balance with what purchases have actually been made?

Re:BIM31550 - VAT: private motoring

Hi thank you for your reply.

With Option 2, Can you claim personal mileage as an expense then?
And Using Notice 700/64 Section 9
There is the fuel scale charge table. It mentions the £40.66 VAT and then £273 - do you need to pay the £273 to anywhere?

With Option 3. How do you come to 12p for the fuel element, is there a refernce table for that figure for different vehicles?


Many thanks for your posts!

Re:BIM31550 - VAT: private motoring

Hi Anne,

In answer to your earlier message today, the 12p per mile is deemed to be the fuel part of the 40p per mile. The remaining 28p is meant to be a contribution by the employer to cover the other costs the employee has in running the car. You can only reclaim VAT on the fule part - the other running costs (insurance, road tax, MOT) are not VATable.
The £273 in your second question is the grossed up part of the fuel scale charge. The idea of the fuel scale charge is to account for the fact that the business is, in effect, "selling" the fuel to the employee. So the £273 goes in Box 6 of the VAT return (total sales), whilst the VAT part of £40.66 goes in box 1 (output VAT).

I hope this helps.

Sheelagh

Re:BIM31550 - VAT: private motoring

I use the VAT Notices most, or help forums like this one. It's probably worth reading (if you can stay awake) HMRC's THE VAT GUIDE (or Notice 700) which you can order free from HMRC.
Fuel and mileage are one of the more complicated areas for most small businesses, although dealing with other EU States for VAT and Intratstat can be a bit confusing.

Sometimes you'll come across some of the more specialised VAT rules depending on who your clients are.

What sort of businesses are you targeting as clients?

Sheelagh

Re:BIM31550 - VAT: private motoring

Hi Anne,

I don't really specialise in any particular business type, though I wouldn't really want high stock turnover businesses, and if I get anything from teh building trade, I pass it on to an associate. Not that I've anything against builders (motor trade workers are dirtier) it's just I never really came across CIS before, and now I don't need to, so I don't.
I have a few motor trade clients. This kind of steering to one trade is due to word of mouth recommendations. It's quite nice, because when you start with a new client it's not all completely new - same suppliers, same jargon etc.
If you're going to work with home based consultants and web designers it would probably help you to brush up on VAT rules for the Single Market (Notice 725) because these people tend to buy a lot of stuff online, or even work with EU and overseas clients.
I hope you're going to get a good website from one of your web designers

Re:BIM31550 - VAT: private motoring

Jodie R wrote:

I know this topic has now been covered to death but...

I've got a client (not VAT registered) who'll be claiming mileage at 40p per mile for the first 10000 miles and then 25p per mile after that, but he only started trading in Sept 05, so do you think I should apportion the 10000 miles for the 2005/06 accounts?

jodie

Just base those rates on the actual mileage covered between the relevant dates.

Regards

Dean