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HMRC internal manual

Employment Income Manual

Employees using own vehicles for work: examples: items which are not mileage allowance payments

Section 229 ITEPA 2003

This page illustrates the calculation of chargeable mileage allowance payments and mileage allowance relief when not all payments for business travel in the employee’s own vehicle are mileage allowance payments (MAPs).

It also shows how to deal with the non-MAPs.

Example 1: for tax years 2002 to 2003 to 2010 to 2011

An employer wishes to encourage staff to give up their company cars, so offers a package comprising the following items to employee H, who will incur standing costs of £300 per month. H’s mileage estimates for 2003 to 2004, sufficiently accurate for EIM31210, are 20,000 business and 5,000 private miles in the first year. In the event, H does 19,000 business miles.

H receives:

  • a guaranteed payment of £275 per month, agreed to comprise

    • business proportion of standing costs, £300 × 20,000 ÷ 25,000 = £240 per month
    • balancing amount to meet guarantee, £35 per month
  • an additional payment of 16p per business mile, in arrears when mileage is reported
  • servicing (contracted for by employee but paid for by the employer, actual cost £150)
  • insurance via the employer’s fleet policy at a cost to the employer of £450 per year

Step 1: find the amount of mileage allowance payments (MAPs) received

MAPs received 12 × £240 + 19,000 × £0.16 = £5,920
     

None of the other items are mileage allowance payments: see below for their treatment.

Step 2: deduct the approved (exempt) amount

10,000 × 40p = £4,000
   
9,000 × 25p = £2,250
Approved amount £6,250

Step 3: is the answer positive or negative?

The answer is negative.

Mileage Allowance Relief available £330
   
AMAPs exempt £5,920

Treatment of non-mileage allowance payments

  • balancing payment, £35 per month = £420: add to earnings and subject to PAYE
  • servicing: payment of employee’s pecuniary liability, report £150 on P11D
  • insurance: benefit in kind of £450, report on P11D

H is entitled to a deduction of £330 from their earnings, but the employer is not entitled to reduce either the £420 earnings or £600 reportable on P11D by this amount.

Example 2: for tax year 2011 to 2012 onwards

An employer wishes to encourage staff to give up their company cars, so offers a package comprising the following items to employee J, who will incur standing costs of £300 per month. J’s mileage estimates for 2011 to 2012, sufficiently accurate for EIM31210, are 20,000 business and 5,000 private miles in the first year. In the event, J does 19,000 business miles.

J receives:

  • a guaranteed payment of £275 per month, agreed to comprise
  • business proportion of standing costs, £300 × 20,000 ÷ 25,000 = £240 per month
  • balancing amount to meet guarantee, £35 per month
  • an additional payment of 16p per business mile, in arrears when mileage is reported
  • servicing (contracted for by employee but paid for by the employer, actual cost £150)
  • insurance via the employer’s fleet policy at a cost to the employer of £450

Step 1: find the amount of mileage allowance payments (MAPs) received

MAPs received 240 × 12 + 19,000 × £0.16 = £5,920
     

Step 2: deduct the approved (exempt) amount

10,000 × 45p = £4,500
   
9,000 × 25p = £2,250
Approved amount £6,750

Step 3: is the answer positive or negative?

The answer is negative.

Mileage Allowance Relief available £830
   
AMAPs exempt £5,920

Treatment of non-mileage allowance payments

  • balancing payment £35 per month = £420: add to earnings and subject to PAYE
  • servicing: payment of employee’s pecuniary liability, report £150 on P11D
  • insurance: benefit in kind of £450, report on P11D

J is entitled to a deduction of £830 from their earnings, but the employer is not entitled to reduce either the £420 earnings or the £600 reportable on the P11D by this amount.