The 6th VAT Directive Headache

The 6th VAT Directive Headache

By Adam Bamford
20 February 2017

Mileage VAT calculations... how do you do yours? Now it's not just a corny rip-off of the crème egg slogan, but a question we always like to ask prospects who are considering automating expenses or switching from another provider to Selenity (formerly Software Europe). It might sound like a boring question, but we ask for a very good reason.

Years ago the taxman accepted a figure for business miles covered and a box full of receipts and agreed a reimbursable amount to the business in question, however (like all good stories) a twist in the tail came along with the 6th VAT directive which considerably tightened the processes and calculations needed for correct reimbursement of VAT which included business mileage.

If you have 10 minutes you can read the article here, it might make good bedtime material to save you counting sheep.

Take a deep breath as I'm about to go through what the 6th Directive is asking you (a busy business owner) to do....

To calculate the VAT available on a fuel receipt, ensure the fuel type purchased is correct for the vehicle the claimant is claiming the mileage against, keep a track of the business miles covered (whilst deducting any personal mileage), ensure that the receipt is VAT applicable, ensure the VAT applicable fuel receipt is within the correct date range of the business miles covered, ensure the business miles are recorded on the correct date for the business purpose and calculate if the VAT on the VAT applicable fuel receipt is too much or too little to correctly (and confidently) claim back just the right amount of VAT for the business miles driven. Now exhale! I'm sure you'll agree that is a lot of hassle!

So how are CFO's coping with this change and what are they asking claimants to do?

  • Only fill up your car with the exact amount of fuel you will be claiming back and only fill up the car on the day you will be doing the journey
  • Enter the same fuel receipt numerous times but with just the amount of fuel that matches the VAT on the journey travelled

Both are time-consuming and annoying to the claimant/end user. A side note here is that these changes came into effect in 2007/08 which means that 10 years later, businesses are still struggling to come to grips with these changes.

So how are we making this complicated task as pleasurable as a drive down a country lane on a sunny summer's afternoon? Automatic 6th VAT reporting... it's as simple as submitting your mileage and popping your fuel receipt on Expenses on the day you purchased the fuel... IT IS AS SIMPLE AS THAT. Expenses does the rest for you.

If you'd like to know more about removing this unnecessary burden from your life, then get in touch.