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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employees using own cars or vans for work: passenger payments: examples

Sections 233 & 234 ITEPA 2003

This page illustrates passenger payments, EIM31400 onwards. The employee’s own car is used in examples 1 and 2, a company car in examples 3 and 4 (otherwise they use the same facts).

Example 1

Employee J makes a business journey of 100 miles in his own car. He is asked to take two other employees, K and L, as passengers.

The employer makes mileage allowance payments of 40p (45p from 6 April 2011) per mile and passenger payments at an additional 3p per mile per passenger.

The calculation for passenger payments only is:

Approved amount for passenger K (see EIM31405) M x R 100 miles @ 5p £ 5
       
Approved amount for passenger L M x R 100 miles @ 5p £ 5
Total approved amount     £10
Passenger payment made   2 x 100 miles @ 3p £ 6

The entire passenger payment of £6 is therefore exempt because it is less than the approved amount, but no relief is available for the additional £4 which could have been exempt had the employer made passenger payments at a higher rate.

Example 2

The facts are as in Example 1 except that the employer makes mileage allowance payments of 43p per mile whether or not passengers are carried.

Approved amount for this journey (as above)   2 passengers £10
       
Passenger payment made     nil

None of the 43p per mile is exempt because none of it is paid specifically because passengers are being carried. There is no relief for the £10 which could have been exempt had the employer made passenger payments.

Examples 3 and 4

The facts are as in examples 1 and 2, except that the car is a company car (a car for which employee J is chargeable to car benefit, EIM23000).

The answers are exactly the same. The exemption for passenger payments applies to journeys in company cars as it does to journeys in the employee’s own car.