Mileage Claims
OverheadsThis Overheads code records the cost of mileage claims incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).
Real-world examples
Consultancy (VAT-registered)
A VAT-registered consultancy reimburses staff for business mileage in their own cars at HMRC's approved mileage rates. Because part of that payment is effectively reimbursing fuel, the business can reclaim input VAT on the fuel element only — calculated using HMRC's advisory fuel rates for the vehicle's engine size and fuel type — provided a valid VAT fuel receipt covering at least that amount is kept. The balance of the mileage payment, covering wear and tear, insurance and depreciation, carries no VAT at all.
Small trade business (not VAT-registered)
A small trade business below the VAT registration threshold pays mileage claims to staff using their own vehicles in exactly the same way, but since the business isn't VAT-registered there's no VAT to reclaim on any part of the payment. A £180 mileage claim is simply a debit of £180 to 7306 (Mileage Claims) and a credit of £180 to 2100 (Creditors Control Account) — no entry to 2201 (Purchase Tax Control Account) at all.
Commonly confused with
Because code 7305 (Congestion Charges) sits right next to this one in Overheads, it's a common mis-posting target. Code 7306 is specifically for mileage claims, while 7305 covers congestion charges — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.
What a mis-posting here costs you
An error posting to Mileage Claims won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.