Employees who use own cars for business could be up to £1,000 worse off as HMRC fails to increase mileage rates
• Company cars fuel allowance up 50% - but no increase at all for employees’ car allowance!
HM Revenue & Customs (HMRC) should raise the tax free mileage rate for employees who use their own cars for business purposes to match recent increases in the mileage rate for company cars, says Wilkins Kennedy, the Top 25 firm of accountants.
The HMRC approved fuel rates for company cars over 2 litres have risen 50% since 2002 from 14p per mile to 21p per mile as of 1st June 2008 to reflect steep increases in the cost of fuel, but the authorised mileage rate for employees who use their own vehicles for business has not increased at all over the last five years!
Employees who use their own cars for business can receive tax free authorised mileage rates from their employer to cover the cost of the vehicle, including fuel, insurance, depreciation, and so on. The tax free amount is 40p per mile for the first 10,000 business miles and 25p per mile over 10,000 business miles.
According to Wilkins Kennedy, if the mileage allowance for employees who use their own vehicles for business had increased to reflect the increases in fuel (as reflected in HMRC’s tax free fuel rates) it would now be 47p a mile. Assuming a car travelled 10,000 miles in a year, the additional mileage allowance would be worth £700 per employee.
Peter Goodman, Senior Tax Partner, Wilkins Kennedy, comments: “The burden of increasing fuel costs falls equally on employees who use company cars or who use their own cars for business journeys. HMRC should recognise this by increasing tax free mileage rates for all business use rather than just company cars.”
“HMRC’s recent announcement of increased tax free fuel rates for company cars recognised the ‘unusual circumstances’ of rapid fuel increases and allowed early implementation by employers. For this reason HMRC allowed implantation from June 1st rather the July 1st. In the light of this HMRC should apply similar treatment and increase the 40p allowance for employees.”
He adds: “The tax on company cars has risen significantly in recent years, so there has been an increase in the number of employees who now use their own cars for business. In these circumstances the HMRC approved mileage rates should reflect the increased costs of motoring so that companies can reimburse such costs in a simple tax free manner.”
______________________________________
[1] http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
http://www.hmrc.gov.uk/rates/travel.htm
ENDS
Press enquiries:
Peter Goodman
Senior Tax Partner
Wilkins Kennedy
Tel: 020 7403 1877
