Calculating mileage claims in your construction company

Are you confused when it comes to calculating mileage claims in your construction company? If you or your employees are using personal vehicles for business travel the company can reimburse for the business miles travelled. But how does it work?

What are mileage claims?

Mileage claims are claims made by directors and employees to the company for using their own private vehicles for business reasons. Examples can include:

  • Visiting customers or potential customers,
  • Collecting materials,
  • Attending training courses.

Travelling to a permanent place of work is a personal expense, not a business one, so mileage cannot be claimed in relation to this.

Directors and employees should always pay for all of the running costs, including fuel, of their own vehicle personally.

What can I pay?

Directors and employees should always keep mileage records. These should record the number of miles travelled in their own vehicle for company business. A mileage rate can then be paid for the total business miles driven.

You can set your own mileage rates, but there are tax implications if the rates exceed the HMRC limits. Any payments in excess of the advised rates may then become taxable.

We, therefore, recommend paying the HMRC mileage rates for diesel and petrol vehicles as follows:

  • 45p per mile for the first 10,000 miles in a year, and
  • 25p per mile thereafter.

HMRC also provide advisory rates for other vehicles and for additional passengers, which can be viewed here.

The company can also reclaim a small proportion of VAT on each mileage claim paid. 

There are several options for calculating the reduced level of VAT. Watch our below video and request our mileage claim template for our recommended method.

How do I process mileage claims in Xero?

There are three ways to process mileage claims in Xero:

  • Using the expenses module (fees apply),
  • Raising a bill from the employee,
  • Entering as a journal – we cover this example in our video below.

If you'd like to find out more about mileage claims, request a copy of our mileage claim template, or need any other accounting help with your construction company, book a free 15-minute discovery call and we'll be happy to help.

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