What policies do employers have for mileage claims when an employee is already receiving a car allowance to cover the capital cost of the car?
As far as I can see there are 2 published rates:
- MAP. This is the 45p/25p per mile rate which is for use of an employee's own car and cover fuel, maintenance and capital costs. i.e an all-inclusive rate,
- AFR. This is the 11p/14p/21p per mile rate which is for use of a company car and covers only fuel.
Neither of these cover the situation where an employee can claim for fuel and maintenance costs, but not capital costs which are covered by a car allowance.
Presumably the car allowance recipient should be able to claim something in between the AFR and the MAP for mileage, but there don't seem to be any available figures for this.
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The employer can pay what it likes.
If the employer pay more than 45/25ppm, then the additional amount is taxable.
It's whatever the two parties agree.
It's not up to you to come up with an amount and justify it.
No, I got the impression you were looking for "official figures" to refer the client to.
You said the employer was paying a car allowance, presumably taxable, which may or may not have any connection to the vehicle the employee is driving. You haven't said. To say the employer is already paying the capital cost is a stretch. The employer may or may not be contributing to it.
The answer is really staring you in the face. It is (edit, sorry, 'up to the') maximum the employer is prepared to pay, which is hopefully more than the minimum the employee will accept. All you can add is smoke and mirrors.
As an employer, my position is
- if we provide a (fully-maintained) company car, our mileage rate should cover the fuel used on company business - hence 14p a mile for most vehicles
- a car allowance allows you to make your own vehicle choice but the employer is still (in effect) covering the cost of the vehicle. Therefore the same fuel-only mileage rate applies.
The employee with a car allowance can claim on their tax return the difference between 45p and 14p.
I would be cautious about requiring those with company cars to pay for their own maintenance. If there was an accident involving a poorly-maintained company vehicle, the company could be liable, just as if there was a poorly maintained machine.
If you are paying maintenance bills for employee-owned vehicles, that's a straightforward benefit in kind. Mileage rates don't come into it.
If employees are using their own vehicles, you should ensure that their insurance covers business use.
'The employee with a car allowance can claim on their tax return the difference between 45p and 14p.'
Do you actually mean claim tax relief on the difference between...?
My wording wasn't quite clear - I meant claim the difference as an expense so they get tax relief on it., so yes.
To be fair, you said this WASN'T a tax question but the rates you are seeking to rely on ARE for tax purposes.
After all, nobody really thinks that it costs the same to run a Mini and a Bentley or that either costs 45p per mile.
Additionally, it is arguable whether the 'car allowance' is relevant at all. Isn't it just a separate item in the remuneration paragraph of the employment contract, wholly unrelated the list price, age and running costs of the employee's private vehicle? Isn't it unrelated to any business mileage the employee might undertake and, isn't it justifiable for the employee, therefore, to claim 45p/mile or whatever the going rate is with that client?
Just thinking aloud, as I hope you are.
Additionally, it is arguable whether the 'car allowance' is relevant at all. Isn't it just a separate item in the remuneration paragraph of the employment contract, wholly unrelated the list price, age and running costs of the employee's private vehicle? Isn't it unrelated to any business mileage the employee might undertake and, isn't it justifiable for the employee, therefore, to claim 45p/mile or whatever the going rate is with that client?
Admittedly a few years ago but I've seen employers limit business mileage to fuel only where "car allowance" was optional to a company car so there might be some mileage (see what I did there?) in looking at the terms under which the car allowance is paid. Again, as you say, not a tax issue, more HR/contract law.
Indeed. Either the OP hasn't gleaned all the relevant info from the client or there is no more relevant information. If it's the latter all options are up for grabs.
OK, some more information.
Now, if I were the employee I would say, 'so what?' My employment package includes an amount that pays for me to run my car contract hire vehicle for my own private purposes.
Unless there was some clause otherwise I would be saying that if the employer wants me to use my contract hire vehicle for business purposes they should stump up the mileage rate they offer to others who also use their own car on business.
Isn't, say, £40k salary + £2k car allowance just the same as £42k salary in this instance, in principle?
I think that's different. The other people who use their own cars that they have bought themselves would be on £40k not £42k
Why? Because they are not good negotiators? Why should this employee be disadvantaged on the mileage rate?
Is it because there is something in their contract of employment that caters for it, or is it just that they are meant to be grateful they have a car allowance and should show goodwill in return?
Only if those options were put to the employee, the employee made a choice between the two and it was confirmed in the contract of employment.
Comparison of salaries is a minefield. The person on the car allowance might believe they are worth more than the person without one. The employer might think that too and that's possibly why they gave them the allowance.
From your posts I suppose the employer and employee never discussed this point and there was nothing in writing. In my opinion it would take a generous employee to simply accept a lower mileage rate. It's all up for negotiation.
You are acting for your client so can not pretend to have the interests of the employee as a priority. If I were acting for the employee I would be going for the 'normal rate' that everyone else gets.
As has been said earlier, though, you might be better off out of it because it is not an accountancy or tax matter. It is a subjective HR matter.
So 2 guys come along for a couple of £40k jobs. First guy has his own car already and the company will pay him £40k + 45p/mile to cover his business use of that car. Second guy has no car. Should he get £40k + £2k car allowance + 45p/mile? I don't think so. Shouldn't he get £40 + £2k car allowance + a lower mileage rate?
Jeez - I think you're asking too much here.
If you need to do some sums on a fair price for the guy's use of what is, in effect, his own car, notwithstanding that he gets extra salary as an allowance, that's one thing - but we seem to be being asked to pluck some figures from the air for a car and employee that we know nothing about.
What car ? How many business miles ? How many private miles ? What are the expenses of the car we're supposed to be contributing to ? How much car allowance does he get ?
So many questions .........
So you give us no information yet expect us to magic an answer.
We're not sawdust plaiters.
In my employment I get a car allowance the same as many of my colleagues. I bank that each month and continue to drive my 15 year old VW with 160k on the clock and claim 45p per mile for any business miles. I'm hoping to get at least another 40k out of it before I change.
Some colleagues use the allowance to take advantage of the company car scheme which doesn't include fuel so there only claim the reduced rate. Others use the allowance against a private/lease car and claim 45p per mile.
Colleagues on the lower band don't get a car allowance at all, but at the same time do much less business mileage and colleagues on a higher bank get a much larger allowance but can only claim 15p per mile for business mileage. This is part of their contract which they accept when they get offered the salary increase.
So it is totally down to the employee and the employer to negotiate between them. A good idea would be to put a formal policy in place for future reference.
Paying a car allowance along with a lower-than-AMAPS mileage rate is an expensive way of financing travel because the allowance is taxable and NIable.
Giving a £4000 allowance to a higher rate taxpayer costs the employer £4,552 (or a bit more if they pay apprentice levy) but benefits the employee by only £2,320, with the remaining £2,232 going to the government in tax and NI.
It's better to always pay the full 45/25p per mile allowable under AMAPS, reducing the car allowance accordingly, as this minimises tax and NI overall.
It needs a bit of calculation but it can be done if you have a reasonable estimate of the annual business mileage, and both employer and employee can end up better off.