This guide is for you if your company is VAT registered, or if you drive a car that belongs to your company. In both cases Mighty asks one extra question when you add a journey: the Engine type. This guide explains why, and what to choose.
If neither applies to you, you won't see Engine type at all. You can skip this guide and follow How to claim mileage for a business journey.
How VAT on mileage works
VAT is the tax added to most prices, which a VAT registered company can claim back from HMRC (the UK tax authority) on the things it buys for the business.
A mileage claim pays you for each mile. Part of that amount is for fuel, and fuel has VAT on it. So your company can claim back the VAT on the fuel part of each mile.
HMRC publishes how much of each mile counts as fuel. It calls this the advisory fuel rate. The rate depends on what the car runs on and the size of its engine, and HMRC updates it every three months.
You never need to work any of this out. Tell Mighty the engine type, and Mighty uses the right rate for the date of your journey and adds the VAT to your next VAT return.
Choosing your engine type
Choose the option that matches the car you drove. You can find the engine size in your car's logbook (the V5C), shown in cc.
| Your car | Choose |
|---|---|
| Petrol, engine up to 1,400cc | Petrol upto 1400cc |
| Petrol, engine from 1,401cc to 2,000cc | Petrol 1401 to 2000cc |
| Petrol, engine over 2,000cc | Petrol over 2000cc |
| Diesel, engine up to 1,600cc | Diesel upto 1600cc |
| Diesel, engine from 1,601cc to 2,000cc | Diesel 1601 to 2000cc |
| Diesel, engine over 2,000cc | Diesel over 2000cc |
| Fully electric, mostly charged at home | Electric (Home Charged) |
| Fully electric, mostly charged at public chargers | Electric (Publicly Charged) |
HMRC treats a hybrid car as petrol or diesel. Choose the petrol or diesel option that matches its engine.
Why electric cars have two options
Electricity at home has a lower rate of VAT than electricity from a public charger. So there is less VAT to claim back on a mile charged at home. Choose the option that matches how you charged for that journey.
Keep a fuel receipt
To claim VAT back on mileage, HMRC expects your company to hold a fuel receipt that covers the journey. The receipt needs to be dated on or before the trip, and be for at least as much fuel as the journey used.
One receipt can cover several journeys. You can store it with your claim using Attach receipt, so it's there if HMRC ever asks. Mighty accepts photos (JPG or PNG), PDFs, and Word or Excel files up to 20MB.
Journeys in a company car
A company car is one your company owns or leases. Your company already pays for the car, so HMRC only lets it pay you back for the fuel you bought for business journeys.
Tick Is this a company car? and Mighty changes three things for that journey:
- It pays the advisory fuel rate for your engine type, instead of the usual rate for each mile. This is a much smaller amount.
- The 10,000 mile limit doesn't apply.
- There's no extra amount for a passenger.
You need to choose an Engine type for a company car, even if your company is not VAT registered. Mighty needs it to find the right fuel rate. Journeys in a company car show a Company car label in your list.
Common questions
I don't see Engine type on my form
Mighty only shows it when it's needed: when your company was VAT registered on the date of the journey, or when you've ticked the company car box. It also only shows for cars, not motorbikes or bicycles.
We use the flat rate VAT scheme
On the flat rate scheme you pay HMRC a fixed share of your sales and don't claim VAT back on most things you buy. That includes mileage. Mighty knows which scheme you're on and won't claim VAT on your mileage.
Do I need to update the fuel rates?
No. We keep HMRC's rates up to date in Mighty, and Mighty always uses the rate that applied on the date of your journey.
I chose the wrong engine type
Open the journey from the three dots on its row, choose Edit, and change it. Mighty works the VAT out again. If the journey is already on a VAT return you've sent to HMRC, Mighty puts the difference on your next return for you.
