SE31275 - Employees using their own vehicles for work: rules from 2002/03 onwards - approved mileage allowance payments: employer's reporting requirements

Section 197AD(1) ICTA 1988 as introduced by Section 57 FA 2001

The key features of the approved mileage allowance payments (AMAPs) system with regard to employers` reporting requirements are as follows.

• Where the mileage allowance payments (MAPs) do not exceed the statutory exempt amount and therefore all qualify in full for exemption from tax as AMAPs, the employer makes no report to the Inland Revenue of the amounts paid. As there is a statutory exemption from tax (as opposed to a taxable amount that is balanced by an underlying deduction), there is no need for a dispensation.

• Where the MAPs exceed the amount that can qualify for exemption as AMAPs, then the payment is split between two categories - the AMAPs amount (see SE31215), and the excess over the AMAPs amount which is chargeable to tax under the normal rules. The excess over the AMAPs amount will normally be reported on form P11D or P9D.
• Apart from the change to dispensations mentioned below, the rules on reporting items related to the employee's vehicle but that are not "mileage allowance payments" are unchanged (see SE31260).

Dispensations

From 6 April 2002 the part of any dispensation relating to payment of expenses for business travel in employees' own vehicles ceases to be effective. This is the case for all items that are related to use of the employee's own vehicle, whether they are payments that come under the AMAPs rules, or items such as vouchers which do not (see SE31260).

Legislation in FA 2001 automatically brought such dispensations or part-dispensations to an end.

Where a dispensation also covers items that are not connected with the costs of the employee's own vehicle, these are not affected - the rest of the dispensation remains in force.

From 6 April 2002 employers cannot apply for any new dispensations for business motoring expenses in employees' own vehicles. The new statutory exemption means that dispensations will not be necessary where the payments made do not exceed the AMAPs amount. And any amount in excess of the AMAPs amount is automatically chargeable to tax and so will not be able to qualify for a dispensation.

Even where the items in question do not come within the AMAPs rules (see SE31260), it is impossible for an employer to get a dispensation. This is because employees can no longer get a deduction for actual expenses of business travel from 6 April 2002 (see SE31335). They can only get deductions in the form of mileage allowance relief (MAR) (see SE31330 onwards). This means that the conditions for an item to qualify for a dispensation will not be satisfied (see SE30051 onwards). Where an employer provides something in connection with the employee's own vehicle that comes outside the AMAPs rules,

• the employer will report the item in full on form P9D/ P11D, and
• as the item is not a MAP, it will not be used to restrict the amount of MAR to which the employee is entitled.

Withdrawal of Fixed Profit Car scheme

The Fixed Profit Car Scheme (FPCS) ran until the end of 2001/02. It was withdrawn from 6 April 2002. (See SE30205 onwards for guidance about the FPCS).

From 6 April 2002 any mileage expenses payments in excess of the AMAPs amount must be returned on form P9D or P11D.

Withdrawal of Car Allowances Enhanced Reporting Scheme

The Car Allowance Enhanced Reporting Scheme (CAERS) also ran until the end of 2001/02. It was withdrawn from 6 April 2002. (See SE30270 onwards for guidance about CAERS).

From 6 April 2002 any payments in excess of the AMAPs amount will have to be returned on form P9D or P11D.

Mileage Allowance Relief Optional Reporting System (MARORS)

For 2002/03 and later years, employers can still agree with their HMRC office to make separate optional reports of negative amounts, that is where the allowance paid is less than the approved amount. In effect the amounts reported are the same as the MAR that each employee can get. The arrangements for entering into MARORS are similar to those for agreeing a CAERS arrangement, except that only "negative" amounts can be reported under MARORS.