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?
Mileage claims are claims made by directors and employees to the company for using their own private vehicles for business reasons. Examples can include:
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.
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:
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.
There are three ways to process mileage claims in Xero:
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.