Mileage payments

Approved Mileage Allowance Payments (AMAPs) are used by a large number of employers. AMAPs are the rates at which an employer can reimburse employees using their own vehicle for business travel up to certain tax-free amounts.

The Treasury is consulting on ways in which rates and mileage thresholds can be set at a level to promote awareness amongst drivers of environmentally friendly business travel. Additionally, Employee Car Ownership Schemes and their interaction with company car tax and mileage payments are part of an ongoing HM Revenue & Customs review.

There are currently two tax-free rates for a privately owned car or van, 40p per mile for the first 10,000 business miles and 25p per mile thereafter. For National Insurance contribution (NIC) purposes the rate used is for the first 10,000 miles, irrespective of the number of business miles travelled. The government also wishes to align the tax and NIC treatment.

Options for change include:
  1. Linking AMAPs limits to the CO2 emissions lower threshold (currently 135 g/km), with rates aligned to CO2 bands up to a specific mileage threshold;
  2. Amending the rates and thresholds to reflect differing employee needs and costs, with mileage rates decreasing in direct proportion to the number of business miles travelled; or
  3. A hybrid system of the first two options, aimed at providing an environmental incentive, while recognising the higher initial costs of employees using their own vehicle for business travel.
Any change is likely to see the number of mileage rates that are payable under AMAPs increased. In reaching any conclusion, there is probably a balance to be struck between what is the fairest system for the majority of employees and what is the simplest option for employers to administer in terms of record keeping. Employer responses should be sent to pa.harris@hmrc.gsi.gov.uk by 31 July 2007.

Paul Tew, Pay Magazine
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