Employer paying 20pm mile telling staff HMRC make it up to 45p

[Deleted User]

Completely nuts... This is a big company that tell staff not to worry that they only get 20p a mile because HMRC will make it up to 45pm a mile... They are adamant.
I thought I was going mad.....Someone please confirm.
That 25p per mile shortfall is an ALLOWANCE. ie. if you do 10000 miles, thats £2500. BUT its £2500 that HMRC knock off your tax code so you save the tax on this - 20% unless you're a 40% tax payer.

So, you basically pay £2500 x 20% = £500 LESS Tax. In effect, 5pm per mile in saved tax. Deffo not made up to 45p by HMRC!
Im right aren't I?

Dazed_and_C0nfused

Yes, HMRC do not pay mileage (unless you work for them I guess).

They do allow tax relief on the difference between the maximum tax free amount, 45p for first 10,000 miles, and what had been paid (when this is lower)

So your example is pretty accurate, the main difference is that the tax saving can range from £0 to, in unusual circumstances, as high as c£1500.  Or even more if HICBC is involved.

But for most people a claim for £2,500 will save between £500 and £1000 (£2,500 x 20 or 40%).

There is an example here on gov.uk
https://www.gov.uk/tax-relief-for-employees

[Deleted User]

exactly what I thought. Its tax relief on the difference not the difference itself.

Mickey666

I imagine the employer considers that they don't need to cover the entire cost of the vehicle because it's not being used exclusively for their business.

Thus, HMRC allows 45p/mile as the TOTAL cost of running a car (depreciation, taxes, insurance, servicing, fuels etc).
Employer pays only 20p/mile for the MARGINAL cost of business miles.
Employee claims the additional 25p/mile as an ALLOWANCE, resulting in some tax savings.

A not uncommon situation I would imagine.  Is it acceptable?  That's really between the OP and their employer.

Dazed_and_C0nfused

The employees would be better off (financially) by negotiating even a very small increase in the amount paid and then claiming tax relief on the smaller difference.

Using the op's example of 10k miles for a straightforward basic rate payer they currently get 
10,000 x 20p = £2,000 + tax relief £500 = £2,500

A small increase to 21p mile would be 
10,000 x 21p = £2,100 + tax relief £480= £2,580

[Deleted User]

Mickey666 said:

I imagine the employer considers that they don't need to cover the entire cost of the vehicle because it's not being used exclusively for their business.

Thus, HMRC allows 45p/mile as the TOTAL cost of running a car (depreciation, taxes, insurance, servicing, fuels etc).
Employer pays only 20p/mile for the MARGINAL cost of business miles.
Employee claims the additional 25p/mile as an ALLOWANCE, resulting in some tax savings.

A not uncommon situation I would imagine.  Is it acceptable?  That's really between the OP and their employer.

but not acceptable to tell employees that HMRC will "make it up" to 45p in tax savings. They won't.

Mickey666

paulfoel said:

Mickey666 said:

I imagine the employer considers that they don't need to cover the entire cost of the vehicle because it's not being used exclusively for their business.

Thus, HMRC allows 45p/mile as the TOTAL cost of running a car (depreciation, taxes, insurance, servicing, fuels etc).
Employer pays only 20p/mile for the MARGINAL cost of business miles.
Employee claims the additional 25p/mile as an ALLOWANCE, resulting in some tax savings.

A not uncommon situation I would imagine.  Is it acceptable?  That's really between the OP and their employer.

but not acceptable to tell employees that HMRC will "make it up" to 45p in tax savings. They won't.

True, if that's really what the employer has stated - but we haven't heard their side of the story.  perhaps there has been a misunderstanding somewhere?

Dazed_and_C0nfused

Mickey666 said:

paulfoel said:

Mickey666 said:

I imagine the employer considers that they don't need to cover the entire cost of the vehicle because it's not being used exclusively for their business.

Thus, HMRC allows 45p/mile as the TOTAL cost of running a car (depreciation, taxes, insurance, servicing, fuels etc).
Employer pays only 20p/mile for the MARGINAL cost of business miles.
Employee claims the additional 25p/mile as an ALLOWANCE, resulting in some tax savings.

A not uncommon situation I would imagine.  Is it acceptable?  That's really between the OP and their employer.

but not acceptable to tell employees that HMRC will "make it up" to 45p in tax savings. They won't.

True, if that's really what the employer has stated - but we haven't heard their side of the story.  perhaps there has been a misunderstanding somewhere?

It may be a misunderstanding (or lack of understanding on the employers part) but it wouldn't be the first time an employer has tried to pull the wool over people's eyes like this.

Grumpy_chap

[Deleted User] said:

This is a big company that tell staff not to worry that they only get 20p a mile because HMRC will make it up to 45pm a mile... 

If it's a "big company" paying what is a low rate, is that because there is some other contribution to the costs of running a car elsewhere in the overall package, for example car allowance?  If so, the 20 ppm would be quite generous as well above the fuel-only cost.

[Deleted User]

Grumpy_chap said:

[Deleted User] said:

This is a big company that tell staff not to worry that they only get 20p a mile because HMRC will make it up to 45pm a mile... 

If it's a "big company" paying what is a low rate, is that because there is some other contribution to the costs of running a car elsewhere in the overall package, for example car allowance?  If so, the 20 ppm would be quite generous as well above the fuel-only cost.

No. Its not the amount that I have a problem - you can take or leave that. But to tell people they can claim the full amount back up to 45p is just wrong.

[Deleted User]

On a similar note, anyone know the rules for field based workers? i.e. no office to go to?
Is it a HMRC rule that you can't claim from home? And that you can only claim from 1st stop of the day, then can't claim for journey home after last stop?

Doesn't work out too well if its 30 miles to customer1, 10 miles to customer2, then 40miles home. You can only claim £2 for an 80 mile journey.