Milage allowance for using your car for company business

[zcacogp]

Chaps,

I have a really, really nasty feeling that this will open a can of worms, but here goes ...

I am a director of a company.

I drive to client sites.

I need to know how much I can pay myself for the use of my own car for these journeys.

The HMRC website throws up this:

http://www.hmrc.gov.uk/manuals/eimanual/EIM31240.h...

... which suggests that I can claim 40p/mile for the first 10,000 miles, and 25p/mile beyond that.

BUT this is dated 2002/2003 - has the rate really not gone up since then? (Seems daft, given the increased cost of motoring, but this is the govt, let's remember.)

If this is NOT correct, what are the correct rates?

Thanks!


Oli.

[thewave xmas ed']

40p on first 10k then 25p on all mileage thereafter is correct i'm affraid.

Remember, if you're VAT registered you can claim VAT on the mileage aswell

1400cc or less

11p (petrol)
10p (diesel)
7p (LPG)

1401cc to 2000cc

13p (Petrol)
10p (Diesel)
8p (LPG)

Over 2000cc

18p (Petrol)
14p (Diesel)
11p (LPG)

VAT is inclusive, so you for example if you did 100 miles (1st 100) in a 2 litre petrol car

100 x 0.40 = £40
VAT Element 100 x 0.13 = £13
£13 x (7/47) = £1.94



100

[atom111]

I pay myself 0.40p a mile upto 10000 then 0.25p on the recommendation of my accoutant it's my understanding the rates have not changed

[zcacogp]

Atom111, The Wave - thanks. Helpful. Damned money-grabbing gits upping the tax take on fuel, but not increasing the allowance accordingly, eh? Who'd have guessed it?

The Wave - you have lost me on the VAT bit. I am paying myself a sum of money to cover the cost of the milage I am doing on behalf of my company, where does VAt come into it? My company accounts are done without consideration of VAT. Also, what's with the calculation of the VAT - £13*(7/47) - I'm lost. Have I missed something?

Another thing - what happened to marginal rate relief? I understood that the first £10,000 profit wasn't taxed, but the HMRC on-line tax calculator - here:

http://mrrcalculator.inlandrevenue.gov.uk/MRR0.asp...

... doesn't take it into account. Has this been abolished? (Yes, I am returning to contracting after a couple of years out - have the b-stards taken that £10k away in this time?)

Thanks again for any help you can offer.


Oli.

[Vixpy1]

All profit is now taxed IIRC

[odyssey2200]

it has been the same for years regardless of the fact that the same gov't has stuck the price of fuel up considerably.!

[zcacogp]

Vixpy, Odyssey2000,

Two answers to my two questions, and both answers being that the govt. is taking as much cash as possible.

Why am I not surprised?

(First £10k now being taxed at 20% - bingo! another £2k in tax, non? Bastards.)


Oli.

ETA: Thanks for the answers.

Edited by zcacogp on Monday 17th December 18:58

[davidd]

You can claim 40pper mile for the first 10,000 miles, thereafter it is 25ppmile.

In addition there is 5pper mile for each passenger (I think there might be a rule for passengers ie they have to be customers, or staff or something so check).

I don't understand the Vat element, certainly as far as reclaiming expenses goes at any rate.

Wheres Eric when we need him...

D

[Eric Mc]

I was out of the office all day yesterday.

A VAT reclaim is allowed by the business on the fuel element of the mileage claims. It is important that relevant petrol vouchers/receipts are retained by the business in support of this VAT reclaim. The fuel vouchers should be attached to any mileage claim forms submitted by the employee/director.

[Deva Link]

thewave xmas ed' said:

40p on first 10k then 25p on all mileage thereafter is correct i'm affraid.

Remember, if you're VAT registered you can claim VAT on the mileage aswell

1400cc or less

11p (petrol)
10p (diesel)
7p (LPG)

1401cc to 2000cc

13p (Petrol)
10p (Diesel)
8p (LPG)

Over 2000cc

18p (Petrol)
14p (Diesel)
11p (LPG)

VAT is inclusive, so you for example if you did 100 miles (1st 100) in a 2 litre petrol car

100 x 0.40 = £40
VAT Element 100 x 0.13 = £13
£13 x (7/47) = £1.94



100

The fuel only rates do change as fuel prices change - in fact they're changing next from 1st Jan: http://www.hmrc.gov.uk/cars/advisory_fuel_current....

Regarding the 40p/25p rates - the cost of motoring has fallen in real terms. These rates are under review and the expectation is that they'll go down.

[davidd]

Deva Link said:

The fuel only rates do change as fuel prices change - in fact they're changing next from 1st Jan: http://www.hmrc.gov.uk/cars/advisory_fuel_current....

Regarding the 40p/25p rates - the cost of motoring has fallen in real terms. These rates are under review and the expectation is that they'll go down.

Costs have gone down? Really? How do you work that out?
Fuel costs a lot more, insurance is about the same, cars are more expensive, tax is higher..

D

[zcacogp]

davidd said:

Deva Link said:

The fuel only rates do change as fuel prices change - in fact they're changing next from 1st Jan: http://www.hmrc.gov.uk/cars/advisory_fuel_current....

Regarding the 40p/25p rates - the cost of motoring has fallen in real terms. These rates are under review and the expectation is that they'll go down.

Costs have gone down? Really? How do you work that out?
Fuel costs a lot more, insurance is about the same, cars are more expensive, tax is higher..

I was thinking exactly the same. Cost of motoring may have been falling in real terms but in absolute terms (in terms of pence per mile) it is rising.

So you can't really use this argument to defend static reimbursement rates for milage driven.

Yes, I can believe that reimbursement rates will drop - believe it easily, given the current administrations' apparent dislike of the motor car (and desire to raise as much revenue as possible from the motorist.)

What say you, Deva Link?


Oli.

[Deva Link]

davidd said:

cars are more expensive,

Until recently all my cars since mid 80's were company cars but I read somewhere the other day that the new Mondeo is the same price as the Sierra was in 1990. I'm pretty sure 5 Series BMW's were over 30 grand in the late 80's.

I did buy Mrs DL a new Peugeot 106XR 3dr (XR was trim, it wasn't sporty in any way) in 1991 and it was £7700. Earlier this year I help youngest daughter buy a new Colt CZ1 5dr with a/c and that was £7500.

Insurance is pretty stable, servicing is undoubtably more expensive per hour, but cars need a lot less servicing than they used to.

Sure, fuel has increased in price, but comparable cars are generally a fair bit more economical these days. I have no idea what MPG the Peugeot did, but I bet it was nowhere near the high 40's the Colt does in town use.

[Eric Mc]

Deva is correct. The 40p/25p also takes into account capital costs as well as running costs. Capital costs of cars have actually fallen in real terms over the past ten years or so.

[zcacogp]

Deva Link said:

I read somewhere the other day that the new Mondeo is the same price as the Sierra was in 1990.

Possibly, in relative terms. A 1990 sierra would have been (maybe) 60% of the average 1990 wage, and a 2007 Mondeo is therefore 60% of the average 2007 wage. But this is not the same figure!

My parents bought a new Passat in 1982. It cost just over £3000. How much is a new Passat now? I don't know, but I do know it is a LOT more than £3000.

This is why it is odd that the allowance for private car use has not risen.


Oli.

[zcacogp]

Eric Mc said:

Deva is correct. The 40p/25p also takes into account capital costs as well as running costs. Capital costs of cars have actually fallen in real terms over the past ten years or so.

Interesting, thanks.

I don't want to doubt you and Deva, but have they fallen in relative terms, or in real terms? (Or am I terminally confused?)


Oli.

[Eric Mc]

I would say both.

Obviously, there will be some variance between different manufacturers and models but, on the whole, an equivalent car is generally cheaper to buy than it was years ago.

[Deva Link]

zcacogp said:

Deva Link said:

I read somewhere the other day that the new Mondeo is the same price as the Sierra was in 1990.

Possibly, in relative terms. A 1990 sierra would have been (maybe) 60% of the average 1990 wage, and a 2007 Mondeo is therefore 60% of the average 2007 wage. But this is not the same figure!

My parents bought a new Passat in 1982. It cost just over £3000. How much is a new Passat now? I don't know, but I do know it is a LOT more than £3000.

This is why it is odd that the allowance for private car use has not risen.


Oli.

No, I mean absolute prices - I gave an example of the Peugeot I bought, and Sierra's were £16K in 1990.

£3000 for the Passat in 1982? Maybe, although that seems low, but it is before most of the inflation of the 80's. However I paid just under £5000 for a Capri in 1978.

I guess it depends on the point in time you pick as a reference.

[bobfaepumphy]

I know people who work for councils and NHS who get 50p per mile. Does anyone know why they can get this amount. If I was my own boss I would have thought that I could have decided how much milage allowance to pay myself assuming it was not to much.

[VictorMeldrew]

I just got my last set of accounts back from accountants, and they advised to make an adjsutment to my next VAT as I had not claimed the VAT on my mileage claims. I'm not sure I understand why either, but every penny helps.