Company vehicles – business mileage rules
Tax, expenses, and mileage calculation can cause even the most enthusiastic fleet manager and driver to bury their head in their hands and groan. HMRC are clear on the business mileage rules, so what exactly are they, and is there a simple way to explain it all?
What is business mileage?
(all definitions from HMRC)
“Business Mileage – Employees using their own vehicles for work are entitled to receive certain payments free of tax and National Insurance contributions (NICs) – the rules for each are related but not identical. If employees receive greater amounts than are allowed tax-free, they will pay tax on the excess.
Mileage Allowance Payments (MAPs) are payments made to an employee for expenses related to their use of their own vehicle for business travel.
“Passenger payments – 5p per passenger per business mile for carrying fellow employees in a car or van on journeys which are also work journeys for them. Only payments specifically for carrying passengers count and there is no relief if you receive less than 5p or nothing at all”
Business mileage and place of work can vary according to each employee in the fleet. The HMRC guide “Employee travel – A tax and NICs guide for employers” gives many clear examples of what is and is not classed as business mileage.
“Nina usually drives to her permanent workplace in Newcastle-upon-Tyne, travelling from her home in Durham, a return distance of 40 miles.
One day she is required to attend a meeting in Manchester and uses her car to travel from home to Manchester and back, a distance of 200 miles. Her employer pays a mileage allowance of 20p a mile, which is less than HMRC’s approved mileage rate for the first 10,000 business miles.Nina and her employer do not have to pay NICs”
“Ola’s employer pays a mileage rate of 75p a mile for business journeys calculated by comparing the cost of the journey from his home to the temporary workplace with what it would have cost if the journey had started and finished at his normal workplace.
HMRC’s approved mileage rate for the first 10,000 miles is 45p. One day Ola drives straight from home to a temporary workplace 20 miles away. From there he goes eight miles to his normal office and finally returns home that evening, a further distance of 15 miles. Applying the ‘lesser-of’ basis, Ola’s employer pays him £12.00 for the journey, that is, for the 16-mile round trip between his normal office and the temporary workplace.
The NICs position is: Payments made 16 miles x 75p = £12.00
For NICs purposes Ola is allowed 28 miles x 45p = £12.60.
As the amount paid is slightly less than would have been allowed for NICs purposes then neither Ola nor his employer will have to pay NICs”
Explaining business mileage to employees and drivers
The HMRC provides a guide for company vehicle drivers which gives information on what are work journeys and what are private journeys.
Vehicle telematics and business mileage
New telematics for company fleets can make it easier on both drivers and fleet managers. Private journeys are hidden and only work journeys are reported. Have you thought of using telematics to simplify the issues arising from business mileage?