SE10150 - Emoluments of employees and office holders: motor mileage allowances paid for business travel in employee's own car - basis of charge
Section 19(1)1 ICTA 1988, Section 153 ICTA 1988
Rather than reimburse employees for the precise amount of the expenses actually incurred for travelling on business, many employers pay a round sum mileage allowance, expressed as x pence per mile.
Mileage allowance payments for business travel using employee's own vehicle or cycle - 2001/02 and earlier
Allowances which effectively do no more than cover the cost of
petrol or oil used on business journeys plus the aggregate
proportion of the standing charges, are not emoluments chargeable
by virtue of Section 19(1)1 ICTA 1988 (but see
SE20601 onwards in the case of directors
and employees within Part V Chapter II ICTA 1988).
Employers, however, often pay more than the costs actually
incurred by their employees. Where that occurs the employee is
chargeable by virtue of Section 19(1)1 on the element of profit in
the payments (see Perrons v Spackman (55TC403)).
In practice the question of whether or not mileage allowances
are emoluments chargeable by virtue of Section 19(1)1 ICTA 1988
will only be relevant if the employee is not a director or employee
paid at a rate of £8,500 a year or more - see table below.
The statutory position can be summarised as follows:
Type of employee |
Basis of charge |
|
| - | A director, or | All mileage
allowances received are assessable emoluments under Section 153
ICTA 1988. A deduction can be made from these emoluments, under
Section 198 ICTA 1988 for qualifying travelling expenses,
|
| - | an employee paid at a rate of £8,500 a year or more (SE20001 onwards) | |
| - | Any other employee | If the amount paid exceeds the tax-allowable costs incurred, excess chargeable as an emolument under Section 19 (1)1 ICTA88(1) * |
See SE10155 for details of the special administrative arrangements for taxing motor mileage allowances up to 5 April 2002.
Mileage allowance payments for business travel using employee's own vehicle or cycle - 2002/03 onwards
From 6 April 2002, mileage allowance payments which employers
make to employees who use their own vehicle or cycle for business
travel are not chargeable to tax if they do not exceed the
appropriate approved mileage allowance payments (AMAPs) limit.
Payments which exceed the AMAPs limit will be taxed to the extent
that they exceed the limit. Additional tax free payments can be
made to employees who carry business passengers.
Full guidance on the AMAPs scheme is at
SE31250 onwards.
Round sum allowances
Round sum allowances, as distinct from reimbursements of expenses actually incurred, are emoluments chargeable under Section 19(1)1 ICTA 1988.
