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HMRC internal manual

Employment Income Manual

The general rule for employees: expenses: expenses that are deductible where some or all of the duties are performed outside the UK: tax year 2002 to 2003 onwards: use of own vehicle or bicycle: example

In the tax year 2003 to 2004, an employee is resident but not ordinarily resident in the UK. He performs part of his duties in Enniskillen and part in Sligo. His total emoluments are £15,000 and he works for 30 days in Enniskillen and 270 days in Sligo. He travels on business in his own car and his total business travel in the year is 9,500 miles. He is not reimbursed for any of his travel costs. He is paid the whole of his earnings in Sligo but brings £7,000 into the UK.

The total mileage allowance relief is 9,500 × 40p = £3,800 (see EIM31240).

The earnings charged on receipt under section 25 are £15,000 × 30/300 = £1,500 (see EIM31750).

Deduct mileage allowance relief from the earnings charged on receipt £1,500 − £1,500 = nil (see EIM31760).

The earnings charged on remittance under section 26 are £7,000 − £1,500 = £5,500 (see EIM31755).

Then deduct the remaining mileage allowance relief from earnings charged on remittance £5,500 − (£3,800 − £1,500) = £3,200.

The net taxable earnings total £3,200.