Business Mileage

lgoochy

I am wondering if somebody can give me some advise as I have conflicted advice from people I know in similar circumstances and my accountant.

I used to have a fully expensed company car which I paid BIK on at the higher rate of tax being a 40% tax payer. They paid all of the fuel and I reimbursed them for private mileage at the HMRC advised rate which at the time was 10p a mile. Easy !

I then opted out of the company car scheme and took a monthly allowance. This is taxed at source at 40% in my pay packet and is shown as a separate line outside of salary on my pay slip. Therefore not subject to inflatory pay increases, not that this matters.

I now fund all of the fuel myself and my company re-imburses me only 13p a mile tax free for business miles (current HMRC rate for the engine size and petrol). I do just short of 10000 business miles a year and my accountant has said that I can claim back an extra 32 p a mile (13 + 32 totals the 45p a mile, so £ 3200) on my tax return as my company should really be paying me 45p a mile as its my car. However they have said that I will be clobbered for income tax on the 32p a mile as its a BIK.

Is this right in terms of the income tax ? If my company paid me 45p a mile I would not pay tax on that. Because I have the added issue of paying someone to do my tax return to try and claw the money back I am having to pay tax on the difference. This cannot be right surely.

The only thing I can think of is that its due to the allowance where my company "contribute" to the car but I am paying tax on this as well.

My customers in industry say I should not have to pay tax on the 32p as its my car and the company are only contributing to it and I should get the full rebate of £ 3200 rather than £ 1920 (3200-40%)

All a bit confusing. Any advice appreciated.

sheramber

Your accountant is correct.

HMRC do not repay the expenses . You only get tax relief on the amount. 

Yes, if you company paid you 45p you would be better off.   That is between you and your company

Icequeen1

sheramber said:

Your accountant is correct.

HMRC do not repay the expenses . You only get tax relief on the amount. 

Yes, if you company paid you 45p you would be better off.   That is between you and your company

I don't think the accountant is correct in terms of the mechanism 'However they have said that I will be clobbered for income tax on the 32p a mile as its a BIK'. 

The crucial bit is that if the employer pays OP 45p a mile,  they get the whole 45p a mile. When you claim it back through HMRC you only get the tax relief on the amount - so in the OP's case he only gets 40% of 32p a mile. 

k3lvc

Icequeen1 said:

sheramber said:

Your accountant is correct.

HMRC do not repay the expenses . You only get tax relief on the amount. 

Yes, if you company paid you 45p you would be better off.   That is between you and your company

The crucial bit is that if the employer pays OP 45p a mile,  they get the whole 45p a mile. When you claim it back through HMRC you only get the tax relief on the amount - so in the OP's case he only gets 40% of 32p a mile. 

Absolutely i.e. the OP physically gets £1,280 rather than the £1,920 suggested

At 13p per mile they're actually receiving about 26p per mile total - at current fuel rates the car needs to be doing over 30mpg just for fuel to be covered by this cost 

Dazed_and_C0nfused

The supposed explanation from the accountant is bizarre, never heard anything like that before and it bears no resemblance to the facts.

The employer had chosen to pay 13p/mile.  Which is their right.  They could pay 0p/mile or £100/mile if they wanted.

As the op is using their own car they can claim tax relief on the difference.  For the first 10,000 miles the allowable rate is 45p/mile.  So the claim for exactly 10,000 miles would be £3,200 (£4,500 less £1,300 reimbursed by the employer).

Assuming the op is paying sufficient 40% tax and there are no other complications such as the HICBC or reduced Personal Allowance then the personal tax saving would be £1,280.

However they have said that I will be clobbered for income tax on the 32p a mile as its a BIK.

There is no BIK as the employer is paying less than 45p/mile, it is a bizarre way of explaining things.

Also if HMRC were to actually pay 45p/mile, (which they don't) why on earth would the employer bother paying 13p/mile, they would surely just let HMRC pay the whole 45p.

lgoochy

I think from the comments that my accountant is right. I will be putting a claim in for 32p a mile to get £ 3200 but will then pay tax on this reducing this to £ 1920 

Dazed_and_C0nfused

lgoochy said:

I think from the comments that my accountant is right. I will be putting a claim in for 32p a mile to get £ 3200 but will then pay tax on this reducing this to £ 1920 

You really couldn't be more wrong.

There is nothing for you to pay tax on.

You would be eligible for tax relief on the difference between what your employer paid (13p) and the amount allowable for the first 10,000 miles of business mileage (45p).

There is no way that will be £1920.

lgoochy

k3lvc said:

Icequeen1 said:

sheramber said:

Your accountant is correct.

HMRC do not repay the expenses . You only get tax relief on the amount. 

Yes, if you company paid you 45p you would be better off.   That is between you and your company

The crucial bit is that if the employer pays OP 45p a mile,  they get the whole 45p a mile. When you claim it back through HMRC you only get the tax relief on the amount - so in the OP's case he only gets 40% of 32p a mile. 

Absolutely i.e. the OP physically gets £1,280 rather than the £1,920 suggested

At 13p per mile they're actually receiving about 26p per mile total - at current fuel rates the car needs to be doing over 30mpg just for fuel to be covered by this cost 

26p a mile ???

no it’s 13 p which comes back to me via expenses so is not tax deductible. 

The car does about 44 mpg on average and in order to break even at 13 p a mile with todays fuel prices it needs to do 60mpg 

So currently subsiding my company for business miles as HMRC don’t adjust the reimbursement rates every month. They only do it once a quarter. 

Dazed_and_C0nfused

lgoochy said:

k3lvc said:

Icequeen1 said:

sheramber said:

Your accountant is correct.

HMRC do not repay the expenses . You only get tax relief on the amount. 

Yes, if you company paid you 45p you would be better off.   That is between you and your company

The crucial bit is that if the employer pays OP 45p a mile,  they get the whole 45p a mile. When you claim it back through HMRC you only get the tax relief on the amount - so in the OP's case he only gets 40% of 32p a mile. 

Absolutely i.e. the OP physically gets £1,280 rather than the £1,920 suggested

At 13p per mile they're actually receiving about 26p per mile total - at current fuel rates the car needs to be doing over 30mpg just for fuel to be covered by this cost 

26p a mile ???

no it’s 13 p which comes back to me via expenses so is not tax deductible. 

The car does about 44 mpg on average and in order to break even at 13 p a mile with todays fuel prices it needs to do 60mpg 

So currently subsiding my company for business miles as HMRC don’t adjust the reimbursement rates every month. They only do it once a quarter. 

You are completely missing the point.

Your employer is paying you 13p/mile.

You are claiming tax relief on 32p/mile (45p less 13p).  

That tax relief is likely to be worth 12.8p/mile.

So you are getting 25.8p/mile in total.

This is assuming you are paying enough 40% tax to get higher rate relief on the whole amount of your claim.

lgoochy

You have lost me and taxation is not my strong point as the damn issue is so complex. 

I am not expecting an adjustment in my tax code. Once my tax return goes in I am expecting a rebate. 

Dazed_and_C0nfused

This really isn't that complex as far as tax goes but for some reason your accountant has apparently given you a non sensical explanation.

The actual tax benefit will be via your Self Assessment return.

However HMRC may then amend your 2022:23 tax code to provisionally allow tax relief for 2022:23 on the assumption that you will do similar mileage in 2022:23.

This tax code adjustment is NOT to allow relief for 2021:22.  You will get the relief due for 2021:22 via your Self Assessment return.