SE31295 - Employees using their own vehicles for work: rules from 2002/03 onwards - calculation of approved mileage allowance payment - pence per mile mileage rate paid by employer - more than 10,000 business miles: examples

Paragraph 4 Schedule 12AA ICTA 1988 as introduced by Schedule 12 FA 2001

These examples illustrate the rules for calculating the approved amount for mileage allowance payments (the AMAPs amount) described at SE31250 onwards.

See SE31225 for what counts as "business travel."

EXAMPLE 1

Employee uses her own car for business travel. In the tax year 2002/03 she covers 15,000 miles of business travel in it. Her employer pays her 39p a mile for the first 8,000 business miles in a tax year and 30p a mile for each business mile above 8,000.

Step 1

Step 2

For 2002/03 the statutory mileage rates for a car are 40p for the first 10,000 miles of business travel and 25p for each additional mile (see SE31240).

Step 3

Compare the figures from Steps 1 and 2.

• If Step 1 = Step 2: all payments are exempt as AMAPs
• If Step 1 > Step 2, the Step 2 amount is exempt as AMAPs but the excess is chargeable to tax
• If Step 1 < Step 2, all payments are exempt as AMAPs and Mileage Allowance Relief is available on the shortfall.

In this example, Step 1 is less than Step 2. All the mileage allowance payments of £5,220 paid by the employer are exempt from tax as an AMAPs. Note that it does not matter that the employee is paid at above the statutory rate for some miles travelled; it is the overall position that matters. The employer does not need to make any report to HMRC of the payments made. (See SE31275 for details of employer reporting, and an explanation of why no dispensation is needed).

Conclusion: the employee is entitled to mileage allowance relief of £30 (see SE31330 onwards

EXAMPLE 2

Employee uses his own car for business travel. In the tax year 2002/03 he covers 12,000 miles of business travel in it. His employer pays him 40p a mile for business travel, but when he travels directly from home to a temporary workplace, the employer only pays for the lesser of the distance between home and the temporary workplace and the office and the temporary workplace. In 2002-03 the employer pays for 10,500 business miles.

Step 1

Step 2

For 2002/03 the statutory mileage rates for a car are 40p for the first 10,000 miles of business travel and 25p for each additional mile (see SE31240).

Step 3

Carry out the same comparison as at Step 3 of Example 1.

In this example, Step 1 is less than Step 2. All the mileage allowance payments of £4,200 paid by the employer are therefore exempt from tax as AMAPs. The employer does not need to make any report to HMRC of the payments made. (See SE31275 for details of employer reporting, and an explanation of why no dispensation is needed).

Conclusion: the employee is entitled to mileage allowance relief of £300 (see SE31330 onwards).