SE31250 - Employees using their own vehicles for work: rules from 2002/03 onwards - tax exemption for approved mileage allowance payments - outline

Section 197AD and Schedule 12AA ICTA 1988 as introduced by Section 57 and Schedule 12 FA 2001

As explained in the overview at SE31205, from 6 April 2002 there is a statutory exempt amount (the approved amount for mileage allowance payments, or the AMAPs amount for short) that employers can pay to employees using their own vehicles for business travel. This is calculated at shown at SE31215. If employers make mileage allowance payments (MAPs, see SE31210) that come to an amount that is equal to or less than the AMAPs amount, the full amount of the MAPs is exempt from tax. If the amounts paid exceed the statutory exempt amount, only the excess is charged to tax.

Only MAPs can be exempt from tax under the AMAPs legislation. There are therefore two stages in identifying whether a payment is exempt under AMAPs.

• First: is the payment one that can be taken into account in working out the amount that is exempt from tax, i.e. is it a "mileage allowance payment" (MAP) (see SE31260 and SE31210).
• Second: is the payment within the AMAPs amount, see this page and SE31255.

There are various points that need to be taken into account when working out how the AMAPs rules are applied:

• The rules on AMAPs only apply in respect of use by the employee of his or her "own" car, van, motor cycle or cycle for business travel . See SE31235 for details of what counts as the employee's "own" vehicle.
• There are special rules that apply if the employee uses more than one vehicle for business travel during the tax year (see SE31270).
• There are special rules that apply if the employee uses his or her vehicle for more than one employment in the tax year (see SE31220, SE31255 and example SE31310 and.example SE31315).
• The rules on what counts as business travel are the same as for Schedule E deductions (see SE31225).

The main consequences of the introduction of AMAPs are as follows:

• Dispensations no longer apply to amounts paid in respect of the employee's business travel in his or her own vehicle. This is the case whether or not the amounts paid are fully exempt from tax as AMAPs (see SE31275).
• Where the payments that the employer makes in respect of the expenses of business travel exceed the AMAPs amount, the employer will only need to report the excess to HMRC. Part E of form P11D from 2002/03 onwards reflects this change.
• Where the payments are less than the AMAPs amount then the employee may get a deduction for mileage allowance relief (MAR - see SE31330 onwards).