EIM31365 | Employees using own vehicles for work: items which are not mileage allowance payments

Section 229 ITEPA 2003

This page illustrates the calculation of chargeable mileage allowance payments and mileage allowance relief when not all payments for business travel in the employee’s own vehicle are mileage allowance payments (MAPs).

It also shows how to deal with the non-MAPs.

Example: for tax year 2011 to 2012 onwards

An employer wishes to encourage staff to give up their company cars, so offers a package comprising the following items to employee J, who will incur standing costs of £300 per month. J’s mileage estimates for 2011 to 2012, sufficiently accurate for EIM31210, are 20,000 business and 5,000 private miles in the first year. In the event, J does 19,000 business miles.

J receives:

• a guaranteed payment of £275 per month, agreed to comprise

• business proportion of standing costs, £300 × 20,000 ÷ 25,000 = £240 per month

• balancing amount to meet guarantee, £35 per month

• an additional payment of 16 pence per business mile, in arrears when mileage is reported

• servicing (contracted for by employee but paid for by the employer, actual cost £150)

• insurance via the employer’s fleet policy at a cost to the employer of £450

Step 1: find the amount of mileage allowance payments (MAPs) received

MAPs received:

• £240 × 12 months = £2,880

• 19,000 miles × 16 pence per mile = £3,040

• Total mileage allowance payments received = £5,920 (£2880 + £3040)

Step 2: deduct the approved (exempt) amount

• first 10,000 miles at 45 pence: 10,000 × 45 pence = £4,500

• additional miles at 25 pence: 9,000 × 25 pence = £2,250

• total exempt amount = £6,750

Step 3: is the answer positive or negative?

The answer is negative:

• mileage allowance payments received: £5,920

• approved exempt amount: £6,750

• mileage Allowance Relief available (EIM31330): £830 (£6,750 - £5,920)

Treatment of non-mileage allowance payments

• balancing payment: taxable as earnings £35 × 12 months = £420 (subject to PAYE)

• servicing: employee’s pecuniary liability (report £150 on P11D)

• insurance: benefit in kind (report £450 on P11D)

J is entitled to a deduction of £830 from their earnings, but the employer is not entitled to reduce either the £420 earnings or the £600 reportable on the P11D by this amount.