SE31760 – The Schedule E expenses rule: expenses that are deductible from income charged under Case II or Case III of Schedule E: 2002/03 onwards: use of own vehicle or bicycle

Section 197AG ICTA 1988

For 2002/03 onwards employees using their own vehicle or bicycle for business journeys are not permitted relief under Section 198 ICTA 1988 for the actual cost of those journeys. Instead they are entitled to a fixed statutory rate of mileage allowance relief to the extent that any reimbursement they receive falls short of the statutory rate, see SE31330 onwards.

Section 197AG ICTA 1988 determines the amount of mileage allowance relief that can be deducted from Case II and Case III income. It does not follow the scheme for other expenses because it provides for a deduction for a notional rather than an actual expense and so it is not possible to determine out of which emoluments it was met. Instead there is a simplified scheme.

To determine the amount of the deduction follow these steps:

• first, compute the total mileage allowance relief that would be due for the employment if the emoluments of the employment were all chargeable under Case I,
• second, deduct the mileage allowance relief from the Case II emoluments,
• third, if any relief is left over deduct it from the Case III emoluments that are chargeable for that year
• fourth, if any relief is left over it can be deducted from any Case III emoluments chargeable for future years.

A deduction can only be given once in respect of the same mileage allowance relief.

This is illustrated by example SE31761.