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Mileage Allowance

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Client has just emailed me saying she wants to pay £10 a week to an employee to cover business mileage.

Presuming employee does more than 22 miles a week, is this a tax free allowance or would client need to pay a per mile amount up to the approved rate?

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By David Ex
13th Sep 2021 19:37

Looks like a taxable round sum to me. The employee could presumably make a claim.

Or could it be treated as an advance then offset against a business mileage claim?

What’s the objection to doing things properly?

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Replying to David Ex:
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By Hugo Fair
13th Sep 2021 20:27

Maybe the objection will evaporate once it is understood that employee will have to record business mileage (proper bus mileage excluding commuting and so on) if wanting to avoid being taxed on it ... whatever 'solution' is applied?
If claimed from employer (as I'm assuming business use of employee's car) then the mileage is needed (to calc the amount based on 45p/mile) ... but if not claimed like that from employer then the £10 is taxable pay and employee will still have to claim the mileage as a tax rebate (but direct from HMRC and wait a considerable time).
So the proposed approach is not an obvious 'good thing' for either party.

EDIT: I'd be wary of the "treated as an advance then offset" approach. Not only is it even more administrative effort, it also encourages HMRC to treat it as taxable pay - quite separate to any later offset. This is a side effect from the early days of RTI when HMRC 'ruled' that any regularity of advances meant they were treated as pay (both in terms of tax treatment and in terms of pay date determining when FPS due).

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RLI
By lionofludesch
13th Sep 2021 22:02

Is it the same journey every week ?

I'd say it's more than 22 miles at a rate of less than 45p = £10. There's no obligation on the employer to pay the full 45p a mile.

The taxpayer can claim the excess to make up to 45p a mile.

Still, it'd be nice to have a proper calculation that isn't just a round sum.

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Replying to lionofludesch:
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By legerman
14th Sep 2021 15:13

lionofludesch wrote:

Is it the same journey every week ?

I'd say it's more than 22 miles at a rate of less than 45p = £10. There's no obligation on the employer to pay the full 45p a mile.

The taxpayer can claim the excess to make up to 45p a mile.

Still, it'd be nice to have a proper calculation that isn't just a round sum.

Not sure if it's the same journeys every week, it involves visiting the client's customers at their home. I'd much prefer it to be done properly, in fact if it isn't then I'm treating it as taxable. The employee can then apply for the full tax relief on 45p a mile, should they so wish.

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Replying to legerman:
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By lionofludesch
14th Sep 2021 16:18

legerman wrote:

lionofludesch wrote:

Is it the same journey every week ?

I'd say it's more than 22 miles at a rate of less than 45p = £10. There's no obligation on the employer to pay the full 45p a mile.

The taxpayer can claim the excess to make up to 45p a mile.

Still, it'd be nice to have a proper calculation that isn't just a round sum.

Not sure if it's the same journeys every week, it involves visiting the client's customers at their home. I'd much prefer it to be done properly, in fact if it isn't then I'm treating it as taxable. The employee can then apply for the full tax relief on 45p a mile, should they so wish.

In that case it sounds taxable through the payroll. Taxpayer can claim an expense to get the tax back but not NI or the new fangled social care boris levy.

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By Leywood
14th Sep 2021 09:27

First question has to be 'why'?

Also never presume.

It could be a tax free payment, but the way she is going about it (probably through being lazy) is not.

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By Tax Dragon
14th Sep 2021 09:46

To "cover" business miles? Kinda implies business miles are less than 22.

Taxable for me - it's just pay.

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Replying to Tax Dragon:
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By lionofludesch
14th Sep 2021 11:47

Tax Dragon wrote:

To "cover" business miles? Kinda implies business miles are less than 22.

Taxable for me - it's just pay.

It's not how I read it but I agree that the number of miles is crucial here. Also, what evidence is retained that these miles are travelled ? Is this tenner paid every week - even when the employee is on holiday ? If it is, it definitely becomes part of the wage.

Could be tax free but the way it's structured is carp and, if there were a PAYE control visit, I'd be preparing the client for a possible settlement. It may be only a couple of quid a week but it's a couple of quid every week and these things mount up.

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Replying to Tax Dragon:
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By legerman
14th Sep 2021 15:05

Tax Dragon wrote:

Taxable for me - it's just pay.

I'm in agreement, and that's the general consensus, but I just wanted to assure myself I was right before replying to her email. Think the mileage is more than 22 but it needs to be paid as correct mileage and not a tenner a week.

Thank you everyone for their replies, much appreciated.

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Replying to Tax Dragon:
By SteveHa
14th Sep 2021 15:57

Are you absolutely sure about that?

ITEPA S229 only requires that payment is for business mileage and does not exceed the AMR.

I can find nothing in the legislation that requires a detailed calculation. Granted, details would have to be kept to ensure that the payment does not exceed AMR, but that seems to be the only condition.

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Replying to SteveHa:
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By justsotax
14th Sep 2021 16:09

I suspect that last point is the critical one.....I can imagine the conversation in 3 years time at a PAYE inspection....

HMRC: looking at your records you appear to pay £10 a week to this emp'ee, why?
Client: its for mileage....
HMRC: how many miles did she do this week...
Client: she didn't leave the office....
HMRC: how many last week?
Client: she doesn't keep a record but I recall that my accountant assured me that I could pay it tax free...

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Replying to justsotax:
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By David Ex
14th Sep 2021 19:24

justsotax wrote:

I suspect that last point is the critical one.....I can imagine the conversation in 3 years time at a PAYE inspection....

That’s the best way to explain it to a hard of thinking client.

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