SE65815 - Tax treatment of local authority officials and employees: payments for using own car for work - general

Car allowances paid by local authorities (which for this purpose include county, district and borough councils, but not parish or community councils), to employees for the use of their cars on local authority business are normally made at rates which are centrally agreed by the National Joint Council (a body which has representatives from the National Employers Organisation for Local Government Services - formerly Local Government Management Board – and from the relevant trade unions). But not all local authorities pay mileage allowances at the rates which are agreed centrally. Therefore you should always establish whether a particular local authority is paying car allowances at the National Joint Council rates, or under its own scheme.

Important note:

Both the statutory rules and the administrative arrangements for dealing with mileage payments are replaced by the new statutory scheme for approved mileage allowance payments (AMAPs) that applies from 2002/03 onwards. Full guidance on the AMAP scheme is at SE31250 onwards.

Rules up to and including 2001/02

Whatever scheme the local authority has for paying mileage allowances, you should ensure that you are familiar with the guidance on the tax treatment of motor mileage allowances paid to employees who use their own cars for business travel. See SE30200 onwards for a comprehensive overview – including descriptions of how the Fixed Profit Car Scheme and Car Allowances Enhanced Reporting Scheme work.

Guidance on the basis of charge of the motor mileage payments is at SE10150 onwards. SE10150 refers to the case of Perrons v Spackman 55TC403. This case is of particular interest when dealing with the tax treatment of mileage payments to local authority employees. It concerns a local authority employee who challenged the Revenue's view that a taxable profit arose when mileage allowances received exceeded the allowable cost of business travel. The case showed that the allowances received (at least to the extent that they are other than reimbursement of actual motoring costs) cannot be regarded as mere reimbursement of expenses actually incurred in making journeys in the course of the employee's duties.

The case also confirms the Revenue's view that the expenses which may be deducted under Section 198(1) ICTA 1988 are limited to those apportionable to business journeys (see SE65831 and SE32355 onwards).

Guidance on the National Joint Council rates of car allowances (i.e. those paid under the centrally agreed scheme) is at SE65820 onwards.

Where the employer pays mileage allowances under its own scheme, the guidance at SE30200 onwards should be followed with regard to end of year reporting requirements.