Business Mileage Rate?

Fonz_2

Hi All,

6 months ago I started a new job and for the first time ever receive a company car allowance.

My choices where this is concerned are as follows:

1.) Receive and allowance and use your own car
2.) Don't receive and allowance and pick a company car.

I opt to take option 1 and use my own car for business travel. For this my company pays me a mileage rate on top of my car allowance.

However, this rate is only 10p per mile which seems very low and I have seen talk of people receiving rates of 25p or even 40p. My employer suggests that 10p is the suggested HMRC rate which seems to check out.

Can anyone offer any advice with regards to what rate is appropriate here?

Thanks

Fonz

Cupra_Kev

In my experience, working for companies without company car allowance I get the 40p/mile rate for any business travel as this covers wear/tear on the car as well as fuel

When I've received company car allowance, it's the 10p rate to cover the fuel - the wear/tear is already covered by the company car allowance.

WestonDave

Kev is right the 40p rate is for people that fund the purchase and maintenance of the car - given that the company is already paying for that in the allowance, the only cost to yourself is the petrol so the 10p rate is appropriate. Its worth pointing out that if they pay more than the HMRC approved rate for the circumstances (10p in this case) you will get taxed on it!

BillTrac

Most companies follow HRMC guidelines on business mileage payments, but you can claim tax relief on the difference between what the company pay you (in your case 10p per business mile) and 40p per business mile. Use form P87 and return this to your tax office, your allowance code will then be altered to reflect this

There are several posts etc regarding this form

Fonz_2

Thanks guys that makes sense.

Interestingly, having done some googling people in this scenario seem to suggest that due to the fact the company car allowance is taxed just like any other income it may be possible to claim tax relief to bridge the gap between mileage rate paid and the 40p/25p ?

Example:

http://www.moneysupermarket.com/community/forums/t/car-allowance-business-mileage-rates-please-help-25903.aspx

Can anyone shed any light on this angle?

Fonz_2

Answered before I posted by BillTrac

ceeforcat

There are calculators out there but maybe I can point you in the right direction. Over the years I have very rarely found giving up the company car to be beneficial despite the ever increasing tax on such a benefit. In some cases, especially where there is low business mileage, it will be beneficial to give up the free fuel which I think is happening in your case.

Let's say you have a company car with a cost price of £15000 and cO2 emissions of 145. The benefit is calculated as follows:

£15000 x 20% (the appropriate percentage for 145 cO2 emissions) =

£3000

The tax on this is £600 per annum if you are basic rate, £1200 if higher rate. The company pays all running costs, finances the car and takes the depreciation hit.

You need to ask yourself if you the cost of

servicing
car tax
repairs
insurance

will be less than this. On top of this you have to finance the car and (the big one) take the hit on the depreciation when you go to sell it.



On the mileage front, the company will still be able to pay you between 10 and 17p per mile if you have a company car (depends on the cc and fuel used)

I hope that this is helpful to you.

stupot573

Hi

I had a company car until made redundant recently. The company paid the standard mileage rates for business mileage.

I thought the p87 was for use of personal car for business mileage, however, a colleague at work, with a company car and exactly the same rates etc, completed the form about 3 months ago, using his mileage logs dating back to 2004 and received a cheque for 6k yesterday!!!!

Is this possible or do you think he is lying? I have studied the form and cannot fathom how you would input the data without lying about the company car

Has anyone heard of similar instances or done similar? Any pointers would be appreciated

Thx

MasterTC

Ceeforcat, you are forgetting the normal option of the cash allowance instead of the company car? For a 15k car this would end up being around the £350 mark per month, which would add another £3360 (standard tax rate) or £2520 (standard tax rate) to the bundle? You can also fill in a form to claim back any reduction in your business mileage claim process if you are using your own car and hence can offset some of this as well. Nowadays it looks much more reasonable to buy your own second hand car and take the cash Especially if you are buying something around the £5 to £10k mark. As after 3-4 years you have paid for the car and are still driving it.

DYOR ofcouse as everybody's situation is different