SE31305 - Employees using their own vehicles for work: rules from 2002/03 onwards - calculation of approved mileage allowance payment - employee uses more than one vehicle during tax year - examples

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

This example illustrates the guidance at SE31270 about the employee who uses more than one vehicle during the tax year.

See SE31225 for what counts as "business travel."

EXAMPLE 1

Employee uses her own car for business travel. She owns two cars and uses both of them for business travel. In the tax year 2002/03 she drives 6,000 business miles in one car and 5,000 business miles in the other. Her employer pays her 40p a mile for all business miles travelled, whichever car she uses.

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). The 10,000 mile limit applies in exactly the same way whether the employee uses one car or several cars during the tax year.

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 < Step2, all payments are exempt as AMAPs and Mileage Allowance Relief is available on the shortfall.

In this example, Step 1 is greater than Step 2. The mileage allowance payments of £4,400 paid by the employer are split as follows:

Conclusion: employer must report £150 taxable on form P11D or P9D.

EXAMPLE 2

Employee uses his own car for business travel. He also uses his own cycle for short business journeys to locations close to his office. In the tax year 2002/03 he covers 9,500 miles of business travel in the car and 700 business miles on the cycle. His employer pays him 40p a mile for business travel in the car and 20p a mile for journeys by cycle.

Step 1

The car and the cycle are treated as different kinds of vehicle for mileage allowance purposes (see SE31240) and therefore the AMAPs amount for each vehicle is worked out separately.

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. For a cycle the rate is 20p for all business miles (see SE31240).

Step 3

Compare the figures from Steps 1 and 2 for each of the car and the cycle separately.

• 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  < Step2, all payments are exempt as AMAPs and Mileage Allowance Relief is available on the shortfall

In this example, for each vehicle, Step 1 equals Step 2. All the payments for both the car and the cycle 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). The employee will not be entitled to any mileage allowance relief (see SE31330 onwards).

Conclusion: no further action required.

If the result was a taxable excess on one kind of vehicle and MAR available on the other, these should be reported separately on forms P9D/P11D, not amalgamated.