Car Allowance and Mileage

wesleyarcher

Hi,
Not sure if this has been answered or not as everything I have read does not 100% apply to my situation.

I work for a company where I am required to drive and visit customers. Instead of giving me a company car, my company has elected to pay me a monthly car allowance (£437.50 pcm, but after deductions (tax, student loan etc), I come out with about £260 pcm) which enabled me to buy myself a car to use for work (and personal) reasons. The car is in my name and I have taken out a personal loan (using the monthly car allowance to pay off the loan over 3 years). However, should I leave my job then I would continue to pay for the car as the loan is in my name, not the company's. I also have to pay for any maintenance myself (which is meant to be included in the car allowance, but because of the amount I recieve and the rules on the age of the car I'm allowed (it has to be no older than 4 years), I am left with about £15 per month to maintain my car).

Secondly, I am also paid a mileage allowance, which is based on the HMRC's advisory fuel rates (search for "Company cars - advisory fuel rates from 1 December 2009" on HMRC's website as I am not permitted to post links as I'm a new user). As I have a 1.9l diesel, I am currently eligible for 11p per mile. I give my company my weekly mileage and they pay rebate me the cost for fuel based on 11p per mile. I cannot claim any personal mileage, so I am only eligible for business mileage accrued during the working week). They also claim back the VAT on the fuel using my VAT receipts.

So essentially, the car is mine (I insure, tax and maintain it), paid for by the company (via a monthly car allowance of £437.50) and mileage is paid at 11p per mile for business miles only.

I have been looking into claiming back the difference on the mileage rate as I have heard I can receive a tax rebate for the next financial year. Is this true, and if so, what do I need to do?

Any help / advice will be greatly appreciated!

TM1976

As the car is your own you can claim tax relief on the difference between the tax approved AMAP rates of 40p for the first 10,000 miles and 25p per mile thereafter. You don't get that amount just the tax you paid on it.

You can claim once the tax year is completed. You have 6 years to claim so you can claim previous years if you have them.

wesleyarcher

TM1976 wrote: »

As the car is your own you can claim tax relief on the difference between the tax approved AMAP rates of 40p for the first 10,000 miles and 25p per mile thereafter. You don't get that amount just the tax you paid on it.

You can claim once the tax year is completed. You have 6 years to claim so you can claim previous years if you have them.

Thanks for the fast reply!

So, I just need to keep track of my mileage and then depending on how many miles I do in a tax year, claim them back based on the 40p/25p? I keep track of how much I've been rebated for fuel only (i.e. mileage per week multiplied by the 11p per mile) and have done this for the entire time I've been out on the road, so hopefully this information is enough?

Do you know how I would do this as I can't seem to find the relevant forms on HMRC's website? I only started working for the company in September 2008, didn't get my car until March 2009 and didn't start doing business mileage from April 2009, so it would only be 2009-10 tax year I would be claiming for at first...

fengirl_2

You can use form P87, or send a schedule to HMRC setting out your claim - it doesnt matter how you do it as long as its clear.

wesleyarcher

fengirl wrote: »

You can use form P87, or send a schedule to HMRC setting out your claim - it doesnt matter how you do it as long as its clear.

Brilliant, thanks for this.

dharm999

Dont forget that you claim the difference between the 40p/25p and 11p you are being paid by your employer, not the whole lot.

wesleyarcher

dharm999 wrote: »

Dont forget that you claim the difference between the 40p/25p and 11p you are being paid by your employer, not the whole lot.

Thanks for the heads up.

Madcatgirl

This is very useful, as i'm in a similar situation - get a car allowance as part of my salary, and get 20p per mile. Luckily, I've kept track of my mileage for the past 3 years. Will look to claim!

elliewelly_2

I drive a fair few miles for work and use my own car but I have never received a car allowance. I therefore claim 40p per mile back from my employer for my mileage.

I calculated that the amount I receive for my 40p per mile in a year is probably roughly the equivalent to a car allowance and therefore never asked my employer for a car allowance.

Other colleagues of mine do (doing the same job but probably more miles per year) do receive car allowances. They receive an amount (admittedly the exact amount is unknown to me) they then use their own car and claim back the lower amount (16p - or whatever they are entitled to for their vehicle).

I have always believed this was fairly equitable. They receive a lump sum (car allowance) but claim back less in mileage. I receive no up front assistance but a higher mileage rate therefore working out approximately the same.

However, I am now wondering if I have got this completely wrong - if I had a car allowance, would I be able to claim the 40p regardless? ie would the company pay me the lower rate and then I could claim the rest back from the tax office?

I think my employer would pay me a car allowance if I asked them to - it's just that I have never thought it would make a difference financially to me.

Your help would be appreciated please as I'm now confused!

Thanks

wesleyarcher

elliewelly wrote: »

I drive a fair few miles for work and use my own car but I have never received a car allowance. I therefore claim 40p per mile back from my employer for my mileage.

I calculated that the amount I receive for my 40p per mile in a year is probably roughly the equivalent to a car allowance and therefore never asked my employer for a car allowance.

Other colleagues of mine do (doing the same job but probably more miles per year) do receive car allowances. They receive an amount (admittedly the exact amount is unknown to me) they then use their own car and claim back the lower amount (16p - or whatever they are entitled to for their vehicle).

I have always believed this was fairly equitable. They receive a lump sum (car allowance) but claim back less in mileage. I receive no up front assistance but a higher mileage rate therefore working out approximately the same.

However, I am now wondering if I have got this completely wrong - if I had a car allowance, would I be able to claim the 40p regardless? ie would the company pay me the lower rate and then I could claim the rest back from the tax office?

I think my employer would pay me a car allowance if I asked them to - it's just that I have never thought it would make a difference financially to me.

Your help would be appreciated please as I'm now confused!

Thanks

If you get a car allowance, that would mean your company is effectively giving you money to put towards / buy a car with. If your company does this, then technically the car is yours (as you would be responsible for organising payment for the car, MOT, Tax and insurance etc). So if the car is then classed as yours, then you can then claim up to 40p per mile for the first 10k miles and 25p per mile for any miles after 10k.

In my case, I was given a car allowance by my company but they classed the car as a company car when it came to mileage (even though the car was bought by me, insured by me, taxed by me and MOT'd by me). Because the car was classed as a company car by my company, but technically a personal car for tax reasons, I was able to claim back the tax on the difference in mileage allowance from HMRC through the P87 form. My company gave me 11p per mile (as my car was a 1.9 diesel - there are guidelines for what your can claim on the HMRC's website). So effectively, I claimed back 29p per mile back in tax relief from HMRC.

You have to ensure you do it correctly though, as you can only claim up to £2,500 using the P87. My claim was nearer £2,800 so I had to complete a self assessment tax return online. It was a little more long winded, but eventually I got around £550 (which was 20% (tax) of the full amount) from them in one lump sum!

Essentially, the car allowance would be down to your company as they would be effectively giving you money to buy a car in lieu of a company car. If they give you the option of a car allowance, you would need to negotiate the mileage rate they would give you. My company was tighter than a camel's backside so they gave us the bare minimum allowed by the tax office, whereas some companies are more employee-friendly and can choose to give you more money per mile. Either way, if the car is technically yours, then you are entitled to 40p per mile for the first 10k and 25p per mile after that. If you aren't getting that, then you should be able to claim the difference using the P87.

Hope this helps!

iamadave

Related to this I have had a Company car for 5 years but always paid my own fuel and have been told recently that I can claim back the tax relief on the difference between the rate paid by employer against hmrc rates.... I am just waiting for hmrc to process my letter for previous years.

Unfortunately as I have to do a self assessment I can only go back 4 years : (