SE31260 - Employees using their own vehicles for work: rules from 2002/03 onwards - approved mileage allowance payments - payments that can qualify for exemption from tax

Section 197AD(2) ICTA 1988 as introduced by Section 57 FA 2001

The only payments that can qualify for exemption from tax under the rules on approved mileage allowance payments (AMAPs) are amounts that fall within the definition of "mileage allowance payments" (MAPs) - see SE31210.

If an amount paid or item provided in connection with the employee's expenses of using his or her vehicle is not a MAP, then it is not capable of being tax exempt under the AMAPs legislation.

Consider for example the following situation. The employee incurs a bill for having the car serviced and the employer pays that bill on behalf of the employee. The payment that the employer makes to the garage is not an amount paid to the employee - and therefore it is not a MAP (see SE31210). (Even if the employer made the payment to the employee, it could not be said to be paid purely in respect of business travel.) As it is not a MAP, it follows that it cannot be exempt from tax under the AMAPs legislation.

The amount paid to meet the bill is a Schedule E emolument under the "pecuniary liability" principle. See SE00580 for an explanation of this principle, and SE00590 for employer reporting requirements in pecuniary liability cases. The employer will need to report the full amount of the pecuniary liability to HMRC at the end of the tax year under normal P9D/P11D arrangements. It will not be possible for the employer to get a dispensation - see SE31275.

As the meeting of the employee's pecuniary liability is not a MAP, it will not be used to restrict the amount of mileage allowance relief to which the employee is entitled (see SE31340).

The position will be similar if the employer

• provides credit tokens or vouchers that the employee uses to meet vehicle expenses (for his or her own vehicle), or
• provides a benefit in connection with the employee's vehicle, or
• pays a sum to the employee that is not in respect of the employee's business travel in the vehicle. (The only difference in this particular instance being that the amount paid may need to be subjected to PAYE rather than reported on P11D or P9D).