SE66705 - Tax treatment of National Health Service employees: payments of car allowances - general

Allowances are paid by NHS employers to employees for the use of the employee's own car on NHS business, as follows.

• England, Wales and Scotland. Allowances are paid under two conditions of service

See SE66710 for more information.

• Northern Ireland. Here, most employees are subject to one of the two conditions of service as for England, Wales and Scotland. But there is a third set of conditions, the Social Work Staff's Joint Council conditions which correspond to local authority (NJC) conditions in England and Wales.

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 NHS employer 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). The employee in that case was a local authority essential car user, but the case is equally applicable to the allowances paid to NHS 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 car and mileage allowance paid under the General Whitley Council and Hospital Medical and Dental Staff conditions is at SE66710 onwards.

Where the employer pays mileage allowances under its own scheme, the general guidance at SE30200 onwards should be followed.