VAT rules on mileage expenses ‘out of line’

The European Court of Justice ruled yesterday that the UK’s VAT rules on staff mileage expenses were incompatible with EU directives.

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The decision threatens savings of up to £250 million a year made by British businesses on mileage expense claims, expense claims handler GlobalExpense said in The Daily Telegraph.

The court ruled that UK law was more flexibly-worded than other rules in other EU states, where tax authorities often require formal VAT invoices. UK law makes it possible for employees to claim mileage expenses while on private business, the court said.

Paddy Behan, a VAT specialist at Grant Thornton UK, said: ‘The existing rules were pragmatic and fair but even though the UK has lost, the reasoning of the court gives some guideline how the UK legislation might be remedied in the future.’

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