Private Car Mileage Allowance - Review Needed

lisyloo

I think it's fair to say that one key capital cost of motoring hasn't change greatly over the last few years - the depreciation costs are very similar.

That assumes they last as long. ???

Until recently I believe there was evidence that the overall cost of motoring had not changed a great deal.
That was however before recent fuel increases and 30% increases in insurance in 2010.

gjd0496

CLAPTON wrote: »

if your company doesn't reimburse you properly for business mileage then you should discuss this with your employer

and you can't reclaim the difference between 25p and 40p from HMRC ; only the tax on that amount

Forgive me if I have misunderstood but was it not you that pointed out its the tax, not the actual difference between 40p and 25p that I can claim back?

In which case, using your figures, I don't have £1150 to pay a share of my tax insurance etc, I only have £230. There may be no depreciation, or very little, but of course the maintenance goes up, which is another reason to change the car of course.

Since I hardly use the car for private use at all, I tend to view most of my costs against the amount I get back and, as I think Lisyloo pointed out, I didn't buy the car with a mind to using it as a company vehicle, although that is how it ended up. Not the tax man's fault, true, but that's the way it is.

And to put an end to those suggestions of hiring a car or using public transport, I have to carry a lot of equipment and often visit sites which are, to say the least, remote. So public transport is out and the logisitics of getting to/from a hire base, loading up my equipment and then setting off to site preclude this as a possibility as well.

So I'm in a corner and looking for a way out, I'm not trying to screw the company or the tax man, just trying to get a fairer deal as I consider things have changed to the point where I need to do something.

jimboban

CLAPTON wrote: »

No I think you misss the substantive point

if e.g. it actually costs you 45ppm and your employer only pays 25 ppm then yes you can reclaim 20% of the difference (i.e. 4ppm) from the taxpayer but you are still out of pocket by 16 ppm

probably better for the HMRC to abolish the rule so there can be no claim and the employers can't use the HMRC rate as a smokescreen but that would cause difficulties for the self employed.

I know it's small, but just to pick up on this, the above isn't quite true.

The maximum HMRC will allow you to base any tax relief claim upon is 40ppm for the first 10,000 miles p.a. and 25ppm thereafter - there is no notion of 'actual cost' as far as HMRC are concerned.

You would potentially be entitled to claim tax relief on "(however many miles travelled * applicable maximum rate) - (however many miles travelled * actual rate paid)" - at whatever rate is applicable to your circumstances (i.e. 22% or 40% etc) - so, if you're a higher rate taxpayer, you'd be looking at 40% of 15p (40-25) - i.e. 6ppm for the first 10,000 miles p.a. - for any mileage above that, you would be seen to be recieving the correct rate.

CLAPTON

gjd0496 wrote: »

Forgive me if I have misunderstood but was it not you that pointed out its the tax, not the actual difference between 40p and 25p that I can claim back?

In which case, using your figures, I don't have £1150 to pay a share of my tax insurance etc, I only have £230. There may be no depreciation, or very little, but of course the maintenance goes up, which is another reason to change the car of course.

Since I hardly use the car for private use at all, I tend to view most of my costs against the amount I get back and, as I think Lisyloo pointed out, I didn't buy the car with a mind to using it as a company vehicle, although that is how it ended up. Not the tax man's fault, true, but that's the way it is.

And to put an end to those suggestions of hiring a car or using public transport, I have to carry a lot of equipment and often visit sites which are, to say the least, remote. So public transport is out and the logisitics of getting to/from a hire base, loading up my equipment and then setting off to site preclude this as a possibility as well.

So I'm in a corner and looking for a way out, I'm not trying to screw the company or the tax man, just trying to get a fairer deal as I consider things have changed to the point where I need to do something.

business mileage is a business cost, just like your employer paying any other business costs
It's not the job of tax payers to pay the costs of running a company; that's the job of the company

It's your company's responsibility to pay theses costs and not the taxpayer
Your company doesn't pay the full cost of your mileage; that's the long and the short of it

CLAPTON

jimboban wrote: »

I know it's small, but just to pick up on this, the above isn't quite true.

The maximum HMRC will allow you to base any tax relief claim upon is 40ppm for the first 10,000 miles p.a. and 25ppm thereafter - there is no notion of 'actual cost' as far as HMRC are concerned.

You would potentially be entitled to claim tax relief on "(however many miles travelled * applicable maximum rate) - (however many miles travelled * actual rate paid)" - at whatever rate is applicable to your circumstances (i.e. 22% or 40% etc) - so, if you're a higher rate taxpayer, you'd be looking at 40% of 15p (40-25) - i.e. 6ppm for the first 10,000 miles p.a. - for any mileage above that, you would be seen to be recieving the correct rate.

yes you are quite correct: I was trying to explain that the OP was still shortchanged by his emplyer and should have use 40ppm and not 45ppm to illustrate the point

however on a detail
HMRC will allow claims based on 'actual costs' but you can't then use the 40ppm when it suits.. its all or nothing

and the current tax rate for basic rate taxpayers is 20% and not 22%

Altarf

Firstly a small point, HMRC do not set the 40p for 10,000 miles and 25p after, the government do. HMRC merely implement the government's wishes.

Secondly I am sure people remember the history of mileage rates, but for those with short memories, the 40p rate was introduced in 2000 under the banner of "environmentally friendly mileage rates". For the 2000-1 tax year the mileage rates were based on the engine size of the car (up to 1000cc, 1001-1500cc, 1501-2000cc, and over 2000cc) with the rates being 28p, 35p, 45p, and 63p for the first 4000 miles then 17p, 20p, 25p, and 36p for the remainder.

The government were unhappy with people being paid 63p per mile to run 'gas guzzlers' and so implemented a phased change. In 2001-2 year the 1000cc and 1001-1500cc rates were merged and the first 4000 mile rate changed to 40p, the remaining rates were unchanged. And then in 2002-3 (and thereafter) the rates were changed to 40p for the first 10000 miles and 25p thereafter, irrespective of the engine size.

So you will see that the government (not HMRC) have always appreciated that larger and more expensive cars cost more to run, but that it was a political decision to only fully relieve from tax the cost of running a smaller car.

Now the next problem with mileage rates is are they to cover the complete cost of running a car, or are they to cover the additional cost of the business mileage for a car you already own.

If you already have a car, then the business mileage will only cost the fuel involved, and the increased costs due to the additional mileage (added maintenance, depreciation, etc). That will not cost 40p per mile. The AA's figures for fuel cost (at 128.3p per litre) for a medium size car (£12-16,000 cost) is 14.4p per mile.

However if the mileage rate is to cover the complete cost of sourcing and running a car, then whether the 40p rate is sufficient obviously depends on the car. But taking a mid range car (keeping in mind that the government's decision in 2000), for example a Ford Focus for 3 years/45,000 miles will cost you about 42p per mile. http://www.fleetnews.co.uk/costs/car-running-costs/36/45000/ford/focus-hatchback/#search

The AA come up with similar figures here (£12-£16,000 15,000 miles) - http://www.theaa.com/allaboutcars/advice/advice_rcosts_petrol_table.jsp

And interestingly if you go back a few years to 2002 when the 40p rate was introduced - http://www.theaa.com/staticdocs/pdf/allaboutcars/fuel/petrol2002.pdf a 1550 - 2000cc car used over 15000 miles per year would have cost about 41p per mile. Or 2003 when the AA switched to a cost basis - http://www.theaa.com/staticdocs/pdf/allaboutcars/fuel/petrol2003.pdf a £13-£20,000 car used over 15000 miles per year would have cost about 42p per mile.

This comes full circle back to the beginning. Most people claiming the mileage rate already have a car, so in 2002 if they were running a medium size car, the 40p provided a nice profit to them (and if they were running a small car, a great profit). With the increase in fuel price, people are just not making the profit they were previously, but are still making a nice profit.

And if people were actually funding the whole car, then 42p in 2003 and 42p in 2011 is the same.

property.advert

Isn't one of the biggest problems the fact that if you are required / forced to use your own vehicle, then either you choose the car you want and end up subsidising your employer or buying a vehicle which is economical enough for your corporate mileage ?

My take on it is that if your employer requires you to have a car then they pay for it, all of it.

John_Pierpoint

Altarf wrote: »

This comes full circle back to the beginning. Most people claiming the mileage rate already have a car, so in 2002 if they were running a medium size car, the 40p provided a nice profit to them (and if they were running a small car, a great profit). With the increase in fuel price, people are just not making the profit they were previously, but are still making a nice profit.

And if people were actually funding the whole car, then 42p in 2003 and 42p in 2011 is the same.

That is why people with peripatetic (travelling) jobs tend to get small reliable diesel cars.

How about a push bike at 20p a mile!
or
making your own bio-diesel from waste vegetable oil?
or
buying an expensive hybrid.

On the other hand, not many people would buy from a salesman on a bike.
Not many plumbers could do their job from the back of a "Smart" car. Though this one might do the trick:
http://www.nextgreencar.com/view-car/28362/SKODA-Fabia-Estate-Diesel-Manual-5-speed/

GAB_2

I think that this thread has wandered away from the original post.

I totally agree the HMRC need to review the authorised mileage allowance. They thought 40p / 25p was fair way back in 2002 and it hasn't changed since. Meanwhile petrol has rocketed in price, back then it was around £0.70 / litre but now it's around £1.30.

Could you imagine the government not raising taxation at each budget? No.

So why is it not reasonable to expect mileage allowance to increase proportionately as well?

So I agree, I think Martin should start a campaign to have it reviewed.

Altarf

GAB wrote: »

I totally agree the HMRC need to review the authorised mileage allowance.

And again. HMRC do not set the mileage allowance that is eligible for tax relief, the government do. HMRC merely enacts the government's wishes.

Also there is nothing to stop your employer paying you whatever mileage rate they want. If they choose to pay more than 40p/25p you just pay tax on the amount over 40p/25p.