It has always be accepted that employers can recover the VAT element of employees’ mileage claims. This position remains under review although there has been a cloud hanging over this for some time and in March this year the European Court of Justice ruled that the UK's VAT rules on staff mileage expenses were incompatible with EU directives. Some estimates are that this will cost British businesses £250m pa. However, there is general feeling that the existing rules were largely fair and that even though the UK has lost, the reasoning of the court gives some guideline how the UK legislation might be remedied in the future. Current advice from HM Customs and Excise is to carry on as before although further clarification is still awaited.

For further information please contact Mark Sheen

12/12/2005