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HMRC internal manual

VAT Government and Public Bodies

Section 33 bodies: cars: motor mileage allowances

A public body may pay employees an amount for each mile driven on official business in their own vehicles. Most mileage allowances are a composite of fuel, maintenance, depreciation and so on. Only the VAT on the fuel element of the payment is recoverable by the paying body. Many public bodies use the NJC rates to determine the fuel element. The AA and RAC also publish tables which provide a fuel and mile rate for a car depending on its cylinder capacity. These figures are VAT inclusive. When claiming back input tax by this method the following records must be kept for each employee:

  • mileage travelled
  • whether the journey is on official business or private
  • cylinder capacity of the car
  • rate of mileage allowance, and
  • input tax claimed.

In limited circumstances this treatment may be extended to persons who are not employees. This must be approved by HMRC but, in broad terms, it applies to individuals who are paid a mileage allowance in the course of a public body fulfilling its statutory role. An example of this would be a self-employed linguist acting as interpreter for official interviews. Those involved must perform their service under a contract, which can be oral, and do so with a degree of regularity.

It does not apply to mileage allowances paid to job interviewees because they are not at that time carrying out a function of the body. There is no entitlement to recover the VAT even if the interviewee is subsequently appointed.

A body can choose which authorised mileage rate to apply but any change cannot be made retrospectively (see the case of Leicester City Council (VTD18108)).