Business motoring: a mixed picture

The Budget 2011 announced further changes which will affect businesses and their employees who use a car for business. There are changes for both employees provided with a company car, and for those using their own car for business journeys.

Use of a privately owned car for business
The amount per mile that an employee can be reimbursed tax free for business journeys is governed by the Authorised Mileage Allowance payments regime (AMAPs). The rates for travel by car have been unchanged for a decade now, but the Budget announcements included a welcome increase in the main rates.

Taxation of company cars
Employees provided with a car for business travel, for whom the car is also available for private use pay tax based on the list price of the car and the CO2 emissions of the vehicle. Various changes are due to commence in April 2011 and April 2012 which have been previously announced

Free fuel for private motoring
Where an employee is provided with free fuel for private motoring by his employer, he is taxed at the relevant percentage (determined by CO2 emissions) of the fixed fuel benefit. This is currently £18,000, having been increased from £16,900 in April 2010 (an increase of 6.5%) which was the first increase for two years.

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robertlovell's picture

CFC Solutions reacts to the fuel duty savings

robertlovell | | Permalink

Neville Briggs, managing director of CFC Solutions, said: “The Chancellor’s moves on reducing fuel duty and abolishing the fuel escalator are very welcome ones but so many other factors are causing petrol and diesel prices to rise quickly that saving a penny or two on a litre has a limited impact.

Certainly, fleet managers should not be using this development as an excuse for inaction on fuel. While savings on fuel duty are welcome, the best way to minimise your company car and van petrol and diesel costs remains a structured fuel policy that enables you to really take control over your fuel use.”

robertlovell's picture

CIOT welcomes mileage rate change & extension to volunteers

robertlovell | | Permalink

The Chartered Institute of Taxation (CIOT) has welcomed the change in the rate of mileage allowance payments that can be paid tax free to employees who use their own cars for business, together with the extension of this to volunteers.

Tina Riches, director, Technical at the CIOT said: “The CIOT recently wrote to the Minister, David Gauke, highlighting the problems for business with the current rates, following representations from our members. Therefore, we are delighted that the Government has listened and increased the main Approved Mileage Allowance Payments (AMAPs) rate from 40p to 45p for the first 10,000 miles of business use with effect from 6 April 2011 to reflect recent increases in fuel costs.

“There is a case for the rate going up to 50p, as we suggested, but this change will improve the current situation of the rate being below the cost of running a car.”

HMRC have confirmed that the new rate will extend to the mileage allowance relief which employees can claim if they are reimbursed less than the AMAP rate.

“This will be welcomed by employees whose employers choose not to pay the maximum amount,” said Tina Riches.

Volunteer drivers are also helped by the changes. They can claim the full cost of their volunteer driving with appropriate records, or use the AMAP rate instead of having to retain detailed records.

Tina Riches added: “Allowing volunteer drivers to claim the full cost of driving will be widely welcomed by the charitable sector. We are also very pleased to note that the allowance for passenger payments of 5p per mile which employees can claim will now be extended to volunteers. This is a sensible pragmatic measure which will encourage shared use of vehicles by volunteers.”