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VAT on Mileage Expense Claims

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Posted on by Mia07

Hi All,

I am trying to configure the following in the expenses/vat for my client.

My client is trying to correctly account for the VAT element claimable on mileage expenses.

So, in the UK the current rate an employee can claim per mile is 45p, once a total of 10,000 miles is hit, the rate drops to 25p/mile.

This is where it gets complicated, of the 45p/mile, 35p/mile has no VAT charged, however the 10p/mile has VAT charged to it. This VAT paid is therefore claimable.

So, if an employee was to submit an expense claim of 100 miles, the following would happen:

100miles*45p = £45

Of that 45p/mile, 10p is vatable therefore, 10p/mile * 100 miles = £10 is inclusive of VAT.

(10/120) *20= £1.667

Therefore £1.667 is a claimable VAT expense for my client.

Any ideas on how I can get D365FO to do this?

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Michal Krejza on at

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Hi Mia07,

Unfortunately the current design in Mileage is not able to cover your scenario completely. The reason is that we do not have VAT groups on Mileage tiers setup.

I was able to get expected results for first range 0..10,000 miles. I have created a new tax code:

Setup tiers for mileage:

And with that I get expected values in expense report:

But this will work only for mileage up to 10,000 miles. Once user crosses the 10,000, it will be necessary to change tax groups to get a new VAT percentage, but it is not possible to do it automatically.

I am just surprised we haven't received complains from UK earlier. We have many customers using Expenses there. Is this some new legislation ? Could you share more details ?

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OsmanIstanbul 2,818 on at

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Hi Mia07

Did you try to change sales tax values on sales tax codes based on the minimum and upper limits? I suppose value options can help you.

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Mia07 95 on at

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Hi Michal,

Thank you for your prompt response, much appreciated.

Firstly, how were you able to reach the 3.84165% for the VAT code? What were your calculations?

I too am surprised this hasn't come up as a requirement for UK implementations as this is not a new legislation.

The only element that changes yearly is the rate i.e. From 1st December 2020 onwards for petrol cars 1400cc or less - 10p of the 45p/mile is the fuel element. In 2019 this was 12p.

I would have thought it would be a standard Microsoft feature. I am assuming many clients must make manual VAT adjustments at the end of each period to reflect this correctly in the VAT claims.

Thank you.

Mia

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Michal Krejza on at

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Hi Mia,

Attached you find Excel I have used for Expense simulation and VAT rate calculation. Mileage-setup-and-calculation.xlsx

The VAT rate for 10p/mile is 20%, but total amount is 45p/mile. Therefore I had to adjust the VAT rate for the setup per Excel calculation. I hope this will clarify the process.

Could you share a link to UK legislation requirements for the mileage calculation ?

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Mia07 95 on at

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Hi Michal,

Thank you for that.

The following two links will help explain further:

www.thefriendlyaccountants.co.uk/.../

www.gov.uk/.../advisory-fuel-rates

@Osman - Thank you too, for your reply. I have tried this but it looks like D365FO does not understand the per mile concept. Have you tried this in the system?

I also get the below error message when populating the minimum and upper limits. Any advice?

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OsmanIstanbul 2,818 on at

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Hello Mia7

no, actually we do not have the same regulations. But I met with a similar situation and we addressed the issue with tax code parameters.

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