that employers may reimburse company car drivers for business mileage. In fact, employees who drive company owned gas guzzlers (engine size > 2,000 cc), have done the best out of the government’s fuel payment policy seeing regular increases over the years. Their fuel rates have increased by 50% from 14p per mile in 2002 to 21p per mile from June 2008.It is an entirely different story for employees who do not have the benefit of a company car, and have to pay all their own running costs. This group of workers are short changed due to the effects of fiscal drag as the approved amount for tax free employer reimbursed mileage payments (AMAP) has remained unchanged at 40p per mile since 2002. This rate covers all running costs, not just fuel, however, whilst owner-drivers have had no rate increases, company car owners have seen their rates increase six times to date.
Colin Ben-Nathan, Chairman of the CIOT’s Employment Taxes Sub-Committee, says: “We welcome the changes made in relation to the AFRs but would suggest that with the recent significant increase in fuel costs it is time for Ministers to look again at the statutory AMAP rates of 40p/25p per mile for those using their own cars for business travel.”
Nichola Ross Martin, tax editor of Accountingweb.co.uk, says, “The Treasury has the power to amend the approved mileage rate as and when it choses, and clearly it choses to turn a blind eye to owner drivers. Quite why it favours company car drivers so blatantly is a point which is lost on me. The AA and RAC both say that the average running cost is now over 50 pence per mile and it is clearly time that the approved employee mileage rate was increased in line with current costs."
The minutes of HMRC's Benefits & Expenses Sub Group in April, go some way to explaining why HMRC is resisting a rate rise they say:
"The Government decided not to increase mileage allowances (AMAPs) in Budget 2008 and announced that the rates would remain unchanged despite recent increases in fuel. AMAPs are not meant to reflect the actual costs of running a car, as one rate cannot cover all the different aspects of using a private car for business journeys, but are set at a rate that the Government considers a reasonable reimbursement for driving on business."
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* Many tax commentators have not picked up on the fact that HMRC "is content" for its new approved fuel only mileage rates to be implemented immediately ie from 1 June.
HMRC said "We have agreed with employers that we should give them one month's notice of a change in advisory fuel rates so that they can amend their systems in good time to implement the new rates. Accordingly we are announcing these new rates in time for implementation on 1 July. However, the recent fuel price increases which justify these AFR changes have happened very rapidly. In these unusual circumstances we are mindful that an implementation date of 1 July might mean that drivers will be incurring higher fuel prices before the new rates become effective. Consequently, where employers are able to do so, HMRC is content for the new rates to be implemented immediately ie from 1 June."
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