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Reimbursement of Business Mileage (Company Car Users)

HM Revenue & Customs now change, on a quarterly basis, the rates at which business mileage allowances may be paid for cars provided by an employer, but where all fuel is paid for by the directors/employees personally.

The rates are designed to reflect changes in petrol/diesel costs and those applicable from 1 March 2013 are set out below.

Vehicle Engine Size                                                      Petrol                                                      Diesel

Up to 1400* cc                                                     15p   (previously 15p)                              12p (previously 13p)

1401* – 2000 cc                                                  17p   (previously 18p)                              14p (previously 15p)

Over 2000 cc                                                       25p   (previously 26p)                              18p (previously 18p)

*1600cc for diesel cars from 1 June 2011.  Rates in brackets applied from 1 December 2012 to 28 February 2013.

The above rates may be used to calculate the amount payable for all business journeys undertaken without incurring any tax liability on the individual employee. Alternatively where all fuel is purchased by the employer the rates can be used to identify the cost of private mileage to be reimbursed to the employer so as to avoid a car fuel benefit charge arising.

Please note that the revised rates only apply in respect of business mileage in company vehicles.  For non company vehicles there has been a change from 6 April 2011 in the 40p/25p rates to 45p/25p which are applicable to the reimbursement of business miles undertaken using an employee’s own vehicle.

Whilst writing I would remind you of the importance of maintaining full and accurate records of mileage undertaken (whether in company cars or employee owned cars) where business mileage is reimbursed using a rate per mile allowance. VAT input tax is recoverable (on the fair proportion of mileage allowances which relates to fuel in respect of which the petrol/diesel rates in the table above may be used) subject to a VAT invoice(s) being held which must equal or exceed the value of the business mileage reimbursement, and the date on the invoice(s) must correspond with the dates covered by any claim. It is recommended that you advise your employees that all mileage/fuel claims must be supported by VAT invoices.


Please do not hesitate to contact us if you need any help.


 John Hill Tel: 01235 773300 Email: john@ace-accounting.co.uk



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