Business mileage plea
4 Aug 08
Mileage expenses for business travel in employees’ own vehicles need to be increased signi?cantly, ICAS says, to reflect additional costs arising from higher road tax, higher fuel costs and, for larger cars, greatly increased depreciation as a result of changes in government policy
People who use their private car occasionally on business can be reimbursed by their employer at a rate of 40p per mile for the first 10,000 business miles. For those doing a higher mileage, the excess miles over 10,000 is reimbursed at 25p.
Such reimbursement is tax free but if an employer was to reimburse more than these figures, which were introduced in 2002, the excess would be taxable.
Recent research shows that driving an average family saloon like a 1.8 Mondeo costs 65p per mile. It follows that when employees use their car on business and are reimbursed by their employer at the official mileage allowance payments, they are left out of pocket to the tune of 25p per mile. They are denied a tax deduction for this cost. ICAS recommends that HMRC revisits mileages rates as a matter of urgency to set a new rate of 65p per mile for occasional use and 40p for excess miles.
Derek Allen, director of taxation with ICAS, said: “In principle, it is wrong to penalise financially any individual on money which they have had to spend exclusively and necessarily in doing their job. At present, that is exactly what is happening with mileage expenses. This is an issue that requires urgent attention. A failure to do so will jeopardise the integrity of the tax system and may risk taxpayers refusing to comply.”