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Q: Can a firm reclaim VAT on a benefit in kind?

Q: My client allows its employees to use their own cars when carrying out duties for the company. It then reimburses the employees for the fuel that they have used by paying them a mileage allowance. Can the client concerned reclaim the VAT on the fuel element within the mileage allowance paid?

A: As per paragraphs 8.7 to 8.9 of Notice 700/64 Motoring Expenses VAT within the fuel element can be claimed (subject to the normal requirement that it relates to the client's 'VATable' business activities). The employee's VAT receipts from their fuel purchases are needed to back up this kind of claim. The fuel element is determined in line with the Benefit In Kind "Advisory Fuel Rates" rates published on HMRC's website. NB. HMRC states that these rates are not for employee owned cars; this comment is for BIK purposes only so for VAT purposes these rates apply for the fuel element whether the car is the employee's or not.