Paying mileage for business use

Do you pay employees mileage allowance for using their own vehicle for business use?

Didn't find your answer?

Note - this is not linked to company car or cash allowance drivers, purely private grey fleet users.

I am trying to understand the environment here, I had assumed since the Corporate Manslaughter Act (2008) came into force that most organisations had moved away from this practice, certainly in the private sector - I understand the process has been somewhat slower in the public sector, largley due to union pressures and bureaucracy - however I have come across a spate of businesses recently that are still utlising this outdated, expensive and dangerous method of employee travel.

If your organisation is doing so:

  • What rate do you pay mileage at?
  • Do you have a substantial grey fleet policy? How often is this reviewed/updated?
  • Have you carried out cost analysis vs other travel methods?
  • For what reason does this practice continue?

I would be really interested to hear the views on this from the accounting world...

Thanks

Mike

 

Replies (38)

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By ireallyshouldknowthisbut
20th Jul 2017 12:56

If you want to advertise, pay SIFT.

Please don't post rubbish like this and bump up old posts.

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Replying to ireallyshouldknowthisbut:
Mike Yardley
By Mike Yardley
20th Jul 2017 13:20

Who mentioned anything about advertising??

I am new to the forum and posting to increase my understanding and analyse the business travel landscape, specifically the approach/focus from within the accounting side of businesses.

Your cynicism is not appreciated.

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Replying to Mike Yardley:
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By Shreeveuk
20th Jul 2017 13:33

I think ireallyshouldknowthisbut was referring to your two posts of earlier today. One being as follows;
__________________________
Hi sarasirianni,

Appreciate this is an old post but I have only just joined up.

Reimbursing staff business miles in private vehicles (also know as 'Grey Fleet') is a minefield! Not only in fuel rates, VAT reclamation etc. but also duty of care and it's not even the most cost effective way to travel!

I work with many businesses that have managed fantastic cost savings by utilising an alternative option to grey fleet mileage reimbursement, at times this can be upto £100 *per journey*.

This can really add up to a huge saving of the course of a year.

If you would like more info please let me know.

Thanks

Mike
_____________________

That was posted on an old post which then arrived at the top of the recent answers list this morning and appears to be a clear advertisement for your services. It also provides the annoying factor that old posts are resurrected as if they were new.

Admittedly your actual post above isn't a direct advertisement but I hope you can now appreciate why the initial response was made.

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Replying to Shreeveuk:
Mike Yardley
By Mike Yardley
21st Jul 2017 09:47

Thanks for the info - as I said, new to this so didn't know it would 'drag up' old posts

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Replying to Mike Yardley:
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By Cheshire
20th Jul 2017 23:48

We are a cynical lot, we HAVE to be with some of the clients we deal with who cannot be let lose with anything sharper than a crayon as one of my learned colleagues says and frankly we see this all the time on here. Post a couple of what look like helpful posts and then bam - in goes the advertising, which appears in the form of the £100 a pop and final line of your ad, I mean, post

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Replying to Cheshire:
Mike Yardley
By Mike Yardley
21st Jul 2017 09:59

I like that - can't be let loose with anything shrper than a crayon - permission to steal?!

It's about helping, I can only help if I know what I'm talking about and if offering a cost saving to an accountant isn't helping I'm not sure what is??

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Replying to Mike Yardley:
Stepurhan
By stepurhan
21st Jul 2017 08:46

Mike Yardley wrote:

Your cynicism is not appreciated.

Their cynicism is totally justified.

https://uk.linkedin.com/in/mike-yardley-4b6950b0

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Replying to stepurhan:
Mike Yardley
By Mike Yardley
21st Jul 2017 10:01

I said it wasn't appreciated.

Why does my job role attract cynicism?

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Replying to carlh:
Mike Yardley
By Mike Yardley
21st Jul 2017 10:03

Thanks - I've read this before.

Was more looking for "real world" and anecdotal examples

Cheers

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By pacta
21st Jul 2017 01:18

1. Mileage is generally paid at £0.45 for the first 10,000 miles and then £0.25 thereafter? Why? It is tax free and considered a perk. Most vehicles will come in between £0.12 and £0.18 per mile in fuel.

2. What the hell is a grey fleet policy? Policies are generally "do business miles, get reimbursed, I say what is or is not a business journey".

3. In most cases travelling by bike, train, hot air balloon or fairy dust are not options; cars are the usual.

4. Because that is how people travel to various destinations and companies do not necessarily always wish to take on the burden of a fixed term lease or HP.

Now I've answered your question I have one for you - what are you selling?

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Replying to pacta:
Mike Yardley
By Mike Yardley
21st Jul 2017 09:56

1. Incorrect - 45p is to reflect all running costs, essential users are paid higher than AFR as the additional is to cover wear & tear on the vehicle and expedited depreciation. The AA report the actual cost of running a car varies between 43-71p/mile. Therefore in most cases 45p/mile is not actually a perk, especially for regular/essential users.

2. If you are allowing employees to travel in their own vehicles ("grey fleet") and don't have any policy to cover you from a duty of care perspective I suggest someone looks at implementing one ASAP before someone ends up in prison.

3. Train is often an option - especially for city based business. Alternative methods of car use - pool car, car sharing, car club, hire car, taxi etc. etc.

4. Why specifically continue to pay mileage - rather than cost analyse the benefits of one of the options in point 3.

I'm not trying to "sell" - I'm trying to help. If all I did was flog my wares all day it would be pretty tiresome, especially given the response to this post. My job satisfaction comes from helping people - whether this is by increasing operational efficiency, creating a cost saving within the business or improving health & safety; and in most cases all 3.

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Replying to Mike Yardley:
Stepurhan
By stepurhan
21st Jul 2017 10:13

Mike Yardley wrote:

I'm not trying to "sell" - I'm trying to help.


I'm sorry to be "cynical" again, but this is nonsense.

People are telling you what they are doing. You are telling them they are wrong. You are also telling them that the solutions just happen to be the things you do for a living.

So you are not "helping" people out of a sense of altruism. You are running a business and, with this and your other posts, trying to encourage people to use that business. (by both the carrot of alleging cost savings, and the stick of terrible consequences)

You may well get job satisfaction from that business, but unless that means you are willing to dole the service out for free, that is irrelevant.

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Replying to stepurhan:
Mike Yardley
By Mike Yardley
21st Jul 2017 11:56

Most people aren't telling me what they are doing - they are beating me down!

I'm not telling anyone they are wrong, there is always a space in company travel for grey fleet & mileage reimbursements. I am educating to the fact that beyond a certain point this is not the most cost effective method of travel, and these 'terrible consequences' are not a stick - they are an absolute fact that many have absolutely not considered (see other comments scoffing at the existence of a grey fleet policy).

I'm not Ghandi, I have a job to do and yes promoting my business, but the service that offers is a solution to a problem that many are ignorant to. Therefore I am helping for mutual benefit; its not like I am hawking something that is not needed or required so to be treated as such is a little disappointing.

What ever happened to listening to people to see if they can help rather than just disregard and belittle?

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Replying to Mike Yardley:
Stepurhan
By stepurhan
21st Jul 2017 12:11

Mike Yardley wrote:

What ever happened to listening to people to see if they can help rather than just disregard and belittle?

The problem with that is the very one that is causing people to give you grief.

If I'm listening to you to see if you can help, then this is a sales pitch. The intention of your posts is clearly to sell us your service. It might be a service that some people could benefit from. It might be a service that saves people money. You are still selling that service on a site whose terms and conditions expressly forbid such activity.

To then talk as if sharing what you do for a living is some altruistic act (you're just trying to help, the money you might get from any subsequent sales is just a happy side effect) pushes it over the top for me.

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Replying to stepurhan:
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By Tax Dragon
21st Jul 2017 12:33

Well said.

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Replying to stepurhan:
Mike Yardley
By Mike Yardley
21st Jul 2017 12:52

Technically, I am providing information and advice on an alternative to paying mileage when employees travel for business.

At no point have I mentioned, promoted or pitched the benefits of the company I work for. I have provided an advisory on a better way for employees to travel than paying mileage, the fact that my company provides this service is coincidental, but at the same time it allows me to speak with authority on the subject as I am an expert in the field. I wouldn't be knowledgeable enough on the subject to provide advice if I didn't do what I do for a living.

If I worked for Evian I could go on a dental health forum and give an advisory that drinking water is better for your teeth than drinking sugary drinks, this would be purely advice and not a sales pitch to buy Evian, this is the same thing.

People who sell for the sake of selling do not generally exist anymore, if they do they don't last long. I approach my job firmly in the mind-set of providing help, guidance, solutions etc. to my clients - If I can't help with something I don't do it. If my solution is to an unknown or overlooked problem then there has to be an opening of dialogue at some point.

Everyone was happy with pen & paper until computers came along, because they didn't know there was a better option.......

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Replying to Mike Yardley:
abc
By Kim Jong Un's Hair
21st Jul 2017 10:20

1. If you compare the running costs of vehicles to the mileage yourself, which is something I do very regularly on behalf of my clients in the interest of tax efficiency, you will find that mileage often trumps the running costs.

AFR is not in point, that is the advisory rate for company owned vehicles.

2. Why will I go to prison? We audit them each year for points and business insurance and part of each claim requires they declare they are adequately insured.

3. All of the other options you mention are very limited and much less efficient for our particular case where my different locations are visited each day in various locales.

4. It is cost and practicality, not just cost. This scheme works.

Another question for you. Why should I risk my revenue stream to try the alternative options?

What savings do you purport to achieve?

How can you assume, without knowing my business, what may or may not work for me?

What can you offer that is as flexible as a car for a salesperson?

You are a salesperson, how do you get around?

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Replying to Kim Jong Un's Hair:
Mike Yardley
By Mike Yardley
21st Jul 2017 11:35

1. The figures I previously quoted are from a far ranging survey led by The AA, individual cases totally depend on the person involved - of course for sporadic usage mileage will trump, but for the employee adding an extra 500 miles per week with the added cost of more regular servicing, tyre changes, more risk of increased costs to pass an MOT, more regular replacement of parts (bulbs, wipers etc.) and the diminished value of the vehicle on sale, it is highly unlikely that the 45p/mile will cover in most cases. And it's not me saying that - its The AA.

2. You won't, you have a process in place. I think this point was in response to a comment something along the lines of a grey fleet policy - well, if you don't have one and your employee is travelling on your company business, skids off the road and is killed because they only had 1mm of tread on their tyres, guest who is getting charged under Corporate Manslaughter?

3. Without knowing the details, how can a pool car parked outside the office door, or a hire car that can be delivered to an employee's home, be less efficient? The vehicle is there as and when it's needed. In fact its more efficient as in many cases the car will already have been safety checked, by clean and full of fuel.

4. But does the scheme provide the optimum solution to the business? Yes "it works", but could it be better? Is anyone asking that question? The average age of a grey fleet vehicle is 8.4 years (BVRLA), does this affect the brand image of your business? Are you more likely to suffer downtime and opportunity lost costs due to a breakdown etc.? As mentioned above, if a clean, safety checked car, full of fuel is available at the same time as the employees own vehicle (which possibly has not been cleaned or safety checked for weeks, even months) is that not *more* practical?

Why would you risk your revenue stream? Would you change your energy supplier if there was a cheaper option? Would you change from renting a property to mortgage if it was presented as a more efficient option? These are things every business would do, and are big decisions - this is a minor change to travel culture and one that can be trialled very easily, as well as proven before hand (see my other reply with example journey).

Savings totally depend on circumstances, if your employees are only travelling 50 miles in a day, I would recommend you continue to pay mileage (of course if your policies are watertight), however over 150 miles it is almost a certainty that it is cheaper to hire a car and pay for the fuel than to reimburse at 45p. And then if there is a build up of drivers using this, you may consider swapping for a pool car, depending on where journeys are originating from.

I don't assume without knowing your business, I would only recommend something once I had a full understanding of your business and travel patterns. The OP was in reaction to coming across a spate of companies recently still using this practice, clearly it is more widespread than I had assumed. Every one is different and mileage has it's place, but it is not a cover all option.

For a salesperson who is on the road every day, this wouldn't be applicable. You would provide a company car or a cash allowance. This is for those ad hoc travellers that head out once a week, once a month in their own vehicle and claim mileage, costing the business a fortune. Again, depending on circumstances there are better options, if your office is in the middle of Birmingham and an employee is travelling to central London, I imagine train would be the recommended method of travel, this also brings intangible benefit such as being able to work during the journey.

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Routemaster image
By tom123
21st Jul 2017 07:10

yes,45p, not all cars are grey (misses point..)

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Replying to tom123:
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By Cheshire
21st Jul 2017 07:35

I like red ones.

Oh why can't we have a like button (sarcasm).

Oh do tell, I'm dying to know how we can all save 'up to £100 *per journey*'.

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Replying to Cheshire:
Mike Yardley
By Mike Yardley
21st Jul 2017 10:13

Grey fleet refers to the fact that whilst employees are driving their own vehicles on your company business, these vehicles become YOUR fleet. As you don't manage these vehicles directly, maintenance, servicing, insurance, tax etc. they are a grey area of your fleet - hence 'grey fleet'.

The sarcasm is dripping off the page, but I'm going to answer you anyway, Example:

Employee X lives 200 miles from head office and is travelling there and back in a day to attend a training course. They travel in their own vehicle and thus claim £180 in mileage.

As an alternative, the company hires a car for the employee for the day to make the journey, costing £25 + £6 each way for delivery & collection, total cost £32. As the employee is not using their own vehicle only the cost of fuel needs to be reimbursed, assuming a conservative average fuel consumption of 48mpg and current average pump price of 113p/l, fuel cost is £42.75.

Cost to the company: Hire car £32 + Fuel £42.75 = £79.75.

Vs £180 mileage claim.

£100 saving.

Even on shorter journeys - e.g. 200 miles, the savings are still around £30 per journey. You can soon do the maths, number of employees travelling, number of journeys per month - soon adds up............

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Replying to Mike Yardley:
By mrme89
21st Jul 2017 10:53

£25 + £6 = £31. Not £32.

You've only calculated fuel one way.

I don't agree that 48mpg is a 'convervative' average.

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Replying to mrme89:
Mike Yardley
By Mike Yardley
21st Jul 2017 11:41

Typo - meant to say £37.

Made the same mistake twice but the end figure was correct!

No I've calculated fuel both ways: 200 miles there, 200 back = 400. 400/48mpg = 8.333* gallons of fuel. Multiply by 4.54 = 37.8333* litres of fuel used, multiply by 113p = £42.75

Agree to disagree, but on a long motorway trip in a new vehicle I would be disappointed to not achieve 50mpg plus. I average 56MPG in my car combined, long motorway journeys c.68MPG and it's just a normal diesel engine.

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By Tax Dragon
21st Jul 2017 11:24

I'm bemused by what you think your market is. The term "grey fleet" suggests a vast number of employees all beetling around racking up business miles. I struggle to believe that employers of such armies are as ignorant as you portray, so are you targeting small employers that might once in a while send someone on a trip and might save a pre-tax tenner if they invested some time and effort?

Suppose I am such an employer. I can do the maths better than you, but are you telling me I can go to prison if I pay my employee 45ppm, but not go to prison if I rent a car for her?

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Replying to Tax Dragon:
Mike Yardley
By Mike Yardley
21st Jul 2017 11:50

The prison thing was a reaction to someone scoffing at the prospect of a grey fleet policy. If you have a policy in place so long as it is watertight you will be covered, doesn't mean you wont have to answer charges.

Whilst an employee is travelling in their car on your business, that car becomes part of your fleet, you own the duty of care. If it skids off the road with 1mm of tread and kills the driver, you will be on the hook for the vehicle being unroadworthy (hence the policy to protect you). If you use a hire car that duty of care is diverted to the rental company, hence removing your exposure. In the example it is possible for the director of a company to be jailed under Corporate Manslaughter Act 2008.

I don't know what the market is myself, hence the OP! As I said I presumed this practice was pretty much eradicated from the private sector, save for short journeys. However, following recent discussions with several different people working in different industry sectors I wanted to get a feel for its prevalence as it appeared my assumption was wrong.

It may just be a case of stumbling across an isolated pocket, but I wanted to ask the question and find out whether there is a focus on this, as accountants are not normally my target market.

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Replying to Mike Yardley:
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By Tax Dragon
21st Jul 2017 12:35

Thanks for clearing that up.

Then I'm not going to prison (at least, not for this); so I'm good, thanks.

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Replying to Tax Dragon:
Mike Yardley
By Mike Yardley
21st Jul 2017 12:57

No but you might be spending too much on employee travel ;-)

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Replying to Mike Yardley:
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By Cheshire
21st Jul 2017 18:07

That assumes we are stupid. As does your example of someone driving 150 miles or whatever it was to go on a course instead of considering the alternatives, some of which are not necessarily aimed at saving money but may be about staff comfort and respecting their travel wishes/needs!

Oh and on the 'selling' issue - you come across as selling because you are trying from the start to tell everyone how to suck eggs and the way your posts are written they clearly come across as a sales pitch. The forum is for Accountants, but if you really must post then you wouldve been better off just answering the odd question here and there as they are raised to actually help people, build your reputation on here as an expert in your field and take it from there, much as eg our learned VAT and tax experts do. They do not ask questions, post surveys, drag up old posts, use the old sales line of I can tell you how to save a fiver, but instead answer the queries raised and are often saught out offline for additional help.
Why Im wasting my time with this I have no idea.

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Replying to Mike Yardley:
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By Bobbo
21st Jul 2017 13:45

How many company directors have gone to prison for corporate manslaughter, or even been charged with the offence, because an employee driving their own car for work purposes died or caused someone else to die in a collision?

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Red Leader
By Red Leader
21st Jul 2017 12:09

It could have been worse. It could have been selling factoring.

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Replying to Red Leader:
the sea otter
By memyself-eye
21st Jul 2017 12:23

Red Leader wrote:

It could have been worse. It could have been selling factoring.

.....or timeshare

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By andy.partridge
21st Jul 2017 13:13

In my opinion the OP has passed the initiation test - that is, the barrel of gunk dumped on his head without flinching. Congratulations! You can now be abused as part of the gang instead of an outsider.

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Replying to andy.partridge:
Mike Yardley
By Mike Yardley
21st Jul 2017 13:15

I'm honoured!

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By justsotax
21st Jul 2017 12:55

isn't that why employers ask for insurance docs and mot cert before allowing their 'grey fleet' to do business mileage.

Of course many might not even pay the 45ppm - they may just say to the employee to claim the tax relief but meet the costs themselves. That way its cheaper for the employer - no cost at all to them....damn it I am good - saved the employer all that money....

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Replying to justsotax:
Mike Yardley
By Mike Yardley
21st Jul 2017 13:14

Yes - the insurance & MOT docs submission would form part of your policy, but there are some (granted, smaller) employers who don't have a policy and are blasé to employees using their vehicles, "just go in your car and we'll pay you the mileage".

Correct, some do not pay the 45p (most do) but paying less and insisting employees use their vehicle then go through the process of claiming tax relief could lead to some employee disgruntlement/disengagement no?

Could you help me out with explaining that last bit a little? Who meets the cost themselves? Are you saying they would pay the employee fuel (say at AFR) and then the employee claims tax relief to bring it up to the equivalent value of the AMAP? So the cost to the employer is only fuel and the employee still gets the full rate; have I interpreted that correctly?

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By justsotax
21st Jul 2017 14:07

no I am saying some employers may choose not to make a ppm payment at all - they are not legally required to. (afterall an employee has to meet their own costs for 'ordinary commuting').

But if you are that risk adverse then you would not do anything (owning a business already puts you in a position to be sued/lose your home etc)...one way to solve it...not have a business?!?!

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RLI
By lionofludesch
21st Jul 2017 18:58

My car's yellow, so this doesn't apply to me.

I did have a grey courtesy car while the yellow one was at the menders, though.

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