What is the status of the Authorised mileage allowance payment (AMAP) rates?

OK, I accept it's not strictly about company cars, but members of this group might be interested in a recent Any Answers question from MJShone, who wanted to find out whether the AMAP rates - increased in the 2011 Budget to 45p & 25p - were definitive or representative. A business client pays employees less than 45p and was being challenged.

The response indicates that others may have pondered the same thing. The replies also pulled together a number of useful resources. The general consensus was that the rates on which employees were taxed were based on a representative figure - not far off the AA's cost per mile figures, and the basis on which the CIOT argued for an increase in the rate in March 2010 (see link below).

"The HMRC rates are absolute in terms of what can be reimbursed without incurring a tax/NIC liability.  Also employees can claim a tax deduction if less then the AMAP rate is paid," commented Vince45, adding that since the employee's payments in this scenario related to home to work mileage, there was is a Class 1 NICs liability too.

Valentino Rossi added: "Frankly I would tell them they should be grateful they are getting something and that if they are not happy they [know] what to do. There are plenty of people that would be happy to get something for their daily travel."

Here are some of the key references cited to help MJShone substantiate the advisory rather than statutory nature of the AMAP rates:

Are there any other issues to consider around the allowances. In another thread in this group, Nigel Harris wondered whether hybrid cars will become more popular (and what about all-electric models?). If the running costs differ significantly from traditional fuel models, is there an argument to introduce favourable tax treatments?


AMAPs statutory not advisory

raychidell | | Permalink


“Here are some of the key references cited to help MJShone substantiate the advisory rather than statutory nature of the AMAP rates.”

AMAP stands for “approved mileage allowances payments” (ITEPA 2003, s. 229). The figures of 45p and 25p are not merely advisory but are given in the legislation (s. 230(2)). Tax law is quite specific in stating that (for private vehicles as opposed to company cars):

  • no income tax liability arises if business mileage is reimbursed at the AMAP rates (s. 229(1)); and
  • income tax relief is available if the employee is not reimbursed, or to the extent that any reimbursement falls short of the approved rates (s. 231).

For tax purposes, the question of whether or not the 45p/25p rates cover the true cost of mileage is irrelevant. Proving that the real cost is higher does not allow an employee to claim higher tax relief. There is therefore a built-in reward in the tax system for those employees who drive cars that achieve a higher number of miles per gallon.

There is, of course, no question of any legal obligation on employers to reimburse business mileage at these or at any other rates.

By contrast, the rates for business mileage in a company car are advisory only. These rates, now updated four times per year and most recently updated as from 1 September 2011, do not have legal status.

Readers may be interested to know that my book Company Cars will be published shortly by Claritax Books, a new publisher of tax books which launches on 1 September (www.claritaxbooks.com).

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