Additional relief on travel expenses
Allowances
Employees can receive a mileage allowance for using their own vehicle for business travel. The allowance is tax and NI free if the amount is no more than HMRC’s approved mileage rates (AMRs) (see The next step ). However, an additional tax relief is available where the mileage allowance received is less than the AMR.
Example. Carla’s workplace is her firm’s HQ but once or twice a week on average she has to travel to customers, suppliers, attend conferences, etc. The company pays Carla a mileage allowance of 40p per mile because she uses her own car for these journeys. This is below the AMR for these journeys (45p). Last tax year she travelled 3,000 miles and received a mileage allowance of £1,200. The AMR amount for 3,000 miles is £1,350, therefore Carla can claim a £150 tax deduction for the difference.
Additional mileage
A less obvious and often overlooked scenario where further tax relief is due occurs where the amount of mileage qualifying for AMRs is greater than that which an employer pays. This typically occurs where the starting or end point of a business journey is not an employee’s normal place of work, e.g. it’s their home.
Missing miles. Carla often starts or ends her journey from home rather than her firm’s HQ. When this happens her firm pays her the AMR for the number of miles between her normal workplace (HQ) and the customer etc. but not for the additional miles she racks up because her journey starts or ends at home.
Example. Carla commutes to work in her car as usual but has an appointment late in the afternoon to visit a customer located nine miles away from her normal workplace. The visit ends after Carla’s normal working hours and so she drives directly home instead of returning to the office. Her journey home is 36 miles. The company pays her the AMR for 18 miles, i.e. the mileage between the office and back. However, the good news for Carla is that HMRC’s rules allow her to claim a tax deduction for the whole of her journey between the customer and her home. That’s another 18 miles at 45p per mile (£8 in total). Not much by itself, but as Carla makes 40 such journeys a year the extra AMRs add up to £320. The position would be similar if Carla had to meet the customer early in the day which required her to start her journey from home, or if it started and ended at home. Carla can claim the extra tax relief she overlooked for the current year and the previous four. Tip. The extra mileage qualifies for a tax deduction at the AMRs. As a rule of thumb, extra tax relief is due for where the mileage covered on a business journey is greater than the employee’s normal commute and they have not received an AMR payment for the extra miles.
Necessary mileage
To qualify for AMR payments the travel must be necessary so that an employee can carry out the duties of their job. Inserting a stop-off which doesn’t have a material and genuine business purpose in what would otherwise be an employee’s normal commute can’t turn it into a qualifying journey. HMRC’s Guidance Notice 490 has some helpful examples (see The next step ).
For the AMR rates and HMRC’s guidance note, visit https://www.tips-and-advice.co.uk , Download Zone, year 14, issue 11.
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