HMRC mileage allowance - is it ever going to change?
Discussion
I would imagine that there are no reliefs avialble.
Normally, when an employer pays for the employee's fuel, that triggers a Fuel Benefit in Kind tax charge on the employee. However, in this case the employer seems to be asking the employee to pay back to the company that part of the fuel they use which is non-employment related. That means, by default, that the fuel the emplyer is paying for must, in the end, equate to fuel used on employment realated trips only. That should then cancel any Benefit in Kind charge - but leave nothing else for the employee to claim separately.
Normally, when an employer pays for the employee's fuel, that triggers a Fuel Benefit in Kind tax charge on the employee. However, in this case the employer seems to be asking the employee to pay back to the company that part of the fuel they use which is non-employment related. That means, by default, that the fuel the emplyer is paying for must, in the end, equate to fuel used on employment realated trips only. That should then cancel any Benefit in Kind charge - but leave nothing else for the employee to claim separately.
taffyracer said:
yes it is a bit strange but that's what they do, anyone know what are the IR / mile for using a private car (diesel) if the fuel is supplied?
Well, it would surely be reasonable to use the rates in the link I posted?Alternatively, how much does the company charge your wife for private mileage? Again, I imagine they ought to be using the advisory rates - if they're charging less then that would presumeably give rise to a taxable benefit. If they're charging more then I suggest that the arrangement needs looking at!
ETA: In fact you could calculate the rate that the company is giving your wife by taking the private repayment from her total fuel bill and then dividing what's left by her business mileage. I don't see why she couldn't then claim the difference between that and the 40p/25p rates back from HMRC.
Edited by Deva Link on Thursday 21st February 18:09
Yeah looked at that but still can't find what i'm looking for, understand the no BIK part due to the employee having the private mileage taken off but what I don't understand is this......if the IR rates allow 40p/25p mile and the fuel element of that equates to 11p mile, surely the differnce (29p/14p) is what she can expect to receive tax free for using her private car for business mileage? If for instance she does 20,000 miles pa on this basis she would be entitled to £2,900 for the 1st 10,000 miles and £1,400 for the remainder equalling £4,300 she would be entitled to tax free. If her car allowance is £3,000/year, would she be entited to claim the the difference between the £3,000 and the £4,300 back? Also, that £3000 allowance is taxed as it goes through her salary so is the tax element not claimable as well, after all the IR rates are tax free?
taffyracer said:
if the IR rates allow 40p/25p mile and the fuel element of that equates to 11p mile, surely the difference (29p/14p) is what she can expect to receive tax free for using her private car for business mileage?
"Receive" from who? If you mean the employer, then that's a matter for negotiation, but the usual way is to pay a taxable monthly allowance (as your wife gets) plus a business mileage payment to cover fuel/oil.Does your wife have the option of having a company car? A taxable £250/mth plus petrol money is a pretty poor deal, especially if she's doing quite a lot of business miles such that the car's depreciation would be accelerated beyond the average. Of course the employer will be calculating that your wife would have to pay maybe £2K (or pick your own number) per year to provide herself with a car anyway. You might think that's unfair and that if she didn't need a car for business use then she'd get the bus, but that's in general not correct.
taffyracer said:
If for instance she does 20,000 miles pa on this basis she would be entitled to £2,900 for the 1st 10,000 miles and £1,400 for the remainder equalling £4,300 she would be entitled to tax free.
"Entitled"? Again, if you mean the employer, then that's a matter for negotiation. If you mean HMRC, then the gross figures are correct, but all she gets back is the tax at her marginal rate, ie 20% or 40% of those figures. So this is one thing that benefits the higher rate tax payer, although of course the tax on £3000/yr benefits the lower rate tax payer.taffyracer said:
If her car allowance is £3,000/year, would she be entitled to claim the the difference between the £3,000 and the £4,300 back?
Not as specifically, although she may well end up getting more back depending on her tax rate and business miles travelled.taffyracer said:
Also, that £3000 allowance is taxed as it goes through her salary so is the tax element not claimable as well, after all the IR rates are tax free?
No - but again she may end up ahead anyway.Yes she has a company car options but only upto £300/month on CH incl maintencance and she will be doing 20k pa, piss poor if you ask me, anyway just to clarify, she can only claim back the difference between what she would be getting if there was no allowance based on the IR rates and her allowance at 40%, ie 40% of £1,300 or £520 pa?
taffyracer said:
Yes she has a company car options but only upto £300/month on CH incl maintencance and she will be doing 20k pa, piss poor if you ask me, anyway just to clarify, she can only claim back the difference between what she would be getting if there was no allowance based on the IR rates and her allowance at 40%, ie 40% of £1,300 or £520 pa?
I'm not totally sure I understand the question, but the allowance and the mileage rates are entirely separate.The allowance is, if you like, compensation for not having a company car. For tax and NI purposes (but not pension) this is treated exactly as if it was salary.
The mileage allowance is based on business miles travelled. Now, as I said earlier, I don't know how it works in the case of your wife who has a company fuel card, BUT *assuming* you can calculate the mileage rate that the company is paying her (or that it's OK to use the HMRC advisroy rates) she can then claim a tax rebate on the difference between what the company is effectively paying her, and the 40p/25p business mile rate.
The fact that your wife is a 40% tax payer works against her a bit in having a company car, but it's hard to imagine that if she's on such a tight budget, and is doing 20K business miles per year, that it wouldn't be better for her to have a company car. Run some calculations through http://www.cashorcar.co.uk .
Deva Link said:
taffyracer said:
.
The allowance is, if you like, compensation for not having a company car. For tax and NI purposes (but not pension) this is treated exactly as if it was salary.
The mileage allowance is based on business miles travelled. Now, as I said earlier, I don't know how it works in the case of your wife who has a company fuel card, BUT *assuming* you can calculate the mileage rate that the company is paying her (or that it's OK to use the HMRC advisroy rates) she can then claim a tax rebate on the difference between what the company is effectively paying her, and the 40p/25p business mile rate.
The fact that your wife is a 40% tax payer works against her a bit in having a company car, but it's hard to imagine that if she's on such a tight budget, and is doing 20K business miles per year, that it wouldn't be better for her to have a company car. Run some calculations through http://www.cashorcar.co.uk .
What i'm trying to get at is if she takes the £3,000 allowance to run a private car (compensation) and does 20,000 business miles pa, she is effectively getting alot less than the IR have advised based on the 40p/25p allowance, is there any way of making up the difference to what she could claim if she didn't accept that allowance, ie the differene between 20,000 miles pa at the IR rates and the £3,000 allowance? The company car option is easier and alot cheaper if not but I want my wife to be driving something decent doing that mileage, i know it's a crap scheme but if there are ways of mitigating the extra outlay by running the car privately then I want to pursue themThe allowance is, if you like, compensation for not having a company car. For tax and NI purposes (but not pension) this is treated exactly as if it was salary.
The mileage allowance is based on business miles travelled. Now, as I said earlier, I don't know how it works in the case of your wife who has a company fuel card, BUT *assuming* you can calculate the mileage rate that the company is paying her (or that it's OK to use the HMRC advisroy rates) she can then claim a tax rebate on the difference between what the company is effectively paying her, and the 40p/25p business mile rate.
The fact that your wife is a 40% tax payer works against her a bit in having a company car, but it's hard to imagine that if she's on such a tight budget, and is doing 20K business miles per year, that it wouldn't be better for her to have a company car. Run some calculations through http://www.cashorcar.co.uk .
taffyracer said:
What i'm trying to get at is if she takes the £3,000 allowance to run a private car (compensation) and does 20,000 business miles pa, she is effectively getting alot less than the IR have advised based on the 40p/25p allowance, is there any way of making up the difference to what she could claim if she didn't accept that allowance, ie the differene between 20,000 miles pa at the IR rates and the £3,000 allowance?
No - not from HMRC.The only thing she could do is approach her company and ask for them to review the way they do things. What do the company expect her to drive? She must have a "decent" job if she's paying 40% tax - do they want her driving around in a Fiesta? She wont get much on CH, full maint for 20K (plus personal miles?) per year. Plus the insurance cost, of course, and presumeably the company pays if the headlight get smashed, or the door dented in a car park?
Funnily enough I was talking to someone the other day who has a choice of either a monthly allowance plus petrol money, or no monthly allowance but then the full 40/25p. He has to decide at the beginning of the tax year and then stick to it.
Yes she has a good job wiht a decent company but the car scheme is crap and totally out of keeping wiht the position/salary and she is expected to do high mileage, company car option is an A3 1.9tdi se sportback which is not exactly nippy or what we want for a 2nd car and they won't allow us to pay the extra, might have to accept it though and let them have the hassle of running the bloody thing.
taffyracer said:
company car option is an A3 1.9tdi se sportback
if your wife is doing 20K biz miles per year, plus some private miles, then I'm guessing the car would need to be on a 3yr/90K mile lease? With full maint, inc tyres, they're doing pretty well to get that car for £300/mth. And then they've got insurance, plus all the incidental costs.I was expecting you to say the car was a supermini. I think in the cirumstances most people would be grabbing the A3 with both hands - it's not exactly shabby. The BIK tax might be a bit horrible though, as it's not a cheap car. But she gets a decent car with no capital outlay or risk (I always thought the lack of risk was worth a good £100/mth) and she just has to buy private fuel (and if she's doing 20K biz miles then she can probably "lose" a good chunk of the private fuel cost).
ETA: If you run through the cash or car calculation (that exact car doesn't appear) then there's no way she should opt out. That demonstrates how mean her employers are being as opting out for 40% tax payers doing chunky business mileage should leave the driver a fair bit better off.
Edited by Deva Link on Thursday 21st February 21:52
No it's not shabby when compared to a clio but it's the base 1.9 diesel which is desperately and agonisingly slow, not what i would want to drive for that sort of mileage but looks like it's her best option as her company's scheme is her company scheme and clearly she will be alot worse off going private, even though she shouldn't be, hey ho, thanks for your help
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