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About the P&I Team Briefings Home | Responses | PFI Index | Policy Guide
Mileage Rates Motor Allowances Briefing no 175 December 07
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Mileage Rates Motor Allowances Briefing no 175 December 07

Introduction

The purpose of this briefing is to provide branches with up to date information on the Approved Mileage Allowance Payments (AMAP) introduced by the Inland Revenue in 2002 and other bargaining information to support local negotiations.

Business use of your own car

Where you are requested or required to use your own car for business purposes, the Inland Revenue Authorisation rate system allows you to claim tax relief on the difference between the amount paid to you by your employer for business use and the Inland Revenue Rates.

In April 2002 the Inland Revenue introduced a system of tax-free payments, called Approved Mileage Allowance Payments (AMAP). Under this system, a flat rate of 40p per mile applies for the first 10,000 annual business miles and a 25p per mile for all annual miles exceeding this, regardless of engine size type of car driven.

The rates summarised below were introduced in April 2002 and remain the same for the financial year 2007/08.

2002 2003 to 2007- 2008

First 10,000 business miles in the tax year

Each mile over 10,000 miles in the tax year

Cars and vans

40p

25p

Motor cycles

24p

24p

Bicycles

20p

20p

There are also travel allowances available for car sharing:

  • Car sharing allowance for each passenger carried (on business journeys) up to 5p per mile. Where the employer pays less than 5p per mile, tax relief may be available, provided the company actually pays for employee(s) to share a car.

'Advisory' fuel rates for company cars

The Inland Revenue also produces 'advisory' rates for payment of fuel in company cars. The following rates apply to all journeys from 1 August 2007 until further notice:

Engine Size

Petrol

Diesel

LPG

1400CC or less

10p

10p

6p

1401cc to 2000cc

13p

10p

8p

Over 2000cc

18p

13p

10p

Income tax and National Insurance Contributions (NICs) may be due on higher rates and tax relief my be due on lower rates.

Negotiated Mileage Rates

Agenda for Change

Section 17: Mileage allowances of Agenda for Change: NHS terms and conditions of service handbook Annex L, lists the following allowances;

  1. Public Transport rate: 23p per mile
  2. Regular user allowance
  3. Cars

    Engine capacity:

    Up to 1000cc

    1001 to 1500cc

    Over 1500cc

    Lump sum

    £508

    £626

    £760

    Up to 3,500 miles

    27.0p per mile

    33.5p per mile

    40.0p per mile

    Thereafter

    16.2p per mile

    18.3p per mile

    20.5p per mile

  4. Standard rates
  5. Cars

    Engine capacity

    Up to 1000cc

    1001 to 1500cc

    Over

    Up to 3,500 miles

    34.0p per mile

    43.0p per mile

    53.0p per mile

    Thereafter

    16.2p per mile

    18.3p per mile

    20.5p per mile

    Motor cycles

    Engine capacity

    125cc or less

    Over 125cc

    Up to 5,000 miles

    16.2p per mile

    25.3p per mile

    Over 5,000 miles

    6.1p per mile

    9.0p per mile

    Pedal cycles: For local agreement, subject to a minimum of 6.2p per mile.

  6. Passenger allowances; each passenger: 2p per mile

Local Government

The Scottish Joint Council for Local Government Services set out car allowances in Appendix c (1) of SJC/3 (May 1999).

Essential users

Lump sum £822

Per mile first 8,500 miles 35.1p

Per mile after 8,500 miles 12.6p

Petrol element 7.846p

Amount of VAT per mile in petrol element 1.169p

Casual users

Per mile first 1,000 miles 53.65p

Per mile next 7,500 miles 43.65p

Per mile after 8,500 miles 12.6p

Petrol element 7.846p

Amount of VAT per mile in petrol element 1.169p

Petrol Element and VAT

Up to 1199cc 7.116p 1200cc and above 7.846p

Amount of VAT in petrol element

Up to 1900cc 1.060p 1200cc and above 1.169p

Motor cycles allowances

 

Not exceeding 150cc

Exceeding 150cc

First 1,500 miles a year

16.0p

16.4p

Next 4,000 miles a year

10.9p

11.2p

Next 5,500 miles a year

8.3p

8.5p

After 11,000 miles a year

3.1p

3.4p

To assist branches with negotiations on mileage rates, here are two examples of negotiated mileage rates from other industries.

British Telecom (BT)

BT uses HM Revenue & Customs advisory mileage rates for company cars.

The mileage rate for employees taking a cash alternative is 12p a mile.

Private Cars: BT encourages employees to use the most appropriate mode of transport for any particular journey. When a private car is used for business purposes, employees are reimbursed at 23p a mile.

Interbrew UK

Company Cars: Users claim for fuel on the basis of the actual pence per mile rate used. Employees are reimbursed for fuel expenses.

Private Cars: 40p a mile up to 10,000miles; 25p thereafter. Rates are reviewed annually. Employees are also encouraged to use hire cars, train or air travel, where appropriate.

Cash alternatives: Employees who have taken a cash alternative to a company car are reimbursed as follows: 30p a mile for the first 4,000 miles; 20.1p a mile for the next 6,000 and 11.4p a mile thereafter.

Cash Alternative(s)

Changes to company car tax and pressures to reduce fleet costs have resulted in many organisations considering alternatives to their company cars. The most common approach is to allow employees to take a cash alternative, which may then be used by employees to purchase their own vehicles, possibly at a preferential rate through a scheme arranged by the company.

Where a car/cash allowance is offered to job need drivers, there may be a caveat that it must be used to acquire an appropriate vehicle, fit for purpose. The payment typically comes in the form of a monthly non-pensionable allowance, the level of which varies according to grade/job.

Employees who take a cash alternative are not necessarily obliged to then use their allowance, the level of which varies according to grade/job.

Employees who take a cash alternative are not necessarily obliged to then use their allowance to purchase a vehicle. For example, employees eligible for a status car who do not drive regularly for business may prefer to keep the money and travel when required in an existing family car or by other means.

When calculating the value of an employee's cash allowance, companies tend to look at monthly lease costs or whole-life running costs of the benchmark company car for the appropriate grade. Some organisations determine the level of the cash alternative with reference to market data.

Reviewing Mileage Rates

Business mileage rates are commonly reviewed on an annual basis. Many organisations revise their rates for company cars and private vehicles in line with HM Revenue & Customs' advisory fuel rates and approved mileage allowance payments.

There are other methods used to review mileage rates. Some companies refer to the retail price index, either the all-items RPI or the more specific sub-index on motoring costs. Others set their mileage rates on the basis of the Automobile Associations (AA) guide to motoring costs.

Action for branches

Branches should be aware that the UNISON Bargaining Zone briefing on Motor Allowances has up to date information on the consequences of the 2002 Inland Revenue change, how to keep records and information, and the changes to company car arrangements.

Branches can also refer to the AA web site, which has a complete guide for company car drivers with sections on: Cash alternative budget calculator; Private fuel benefit calculator; Car tax calculator; Co2 based company car tax; Private fuel scale charge & Inland revenue approved mileage rates.

Where branches have negotiated agreements on Mileage Rates, or are in the process of negotiating a new agreement, they should forward them to Victoria Fleming (v.fleming@unison.co.uk) at the Policy Information Team for inclusion in the Bargaining Information System.

For further information

Bargaining Zone Document on Motor Allowances
http://www.unison.org.uk/
bargaining/doc_view.asp?did=258

UNISON Bargaining Information System form on agreements and allowances
http://www.unison.org.uk/
acrobat/W1377.doc

HM Revenue & Customs Specific Deductions: travel & subsistence
http://www.hmrc.gov.uk/
manuals/bimmanual/BIM47701.htm

The Automobile Association Complete Guide for Company Car Drivers
http://www.theaa.com/allaboutcars/
companycartax/index.jsp

Contacts list:

Kevin O'Neil
k.oneil@unison.co.uk

Dave Watson d.watson@unison.co.uk

@ The P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141-307 2572

 

 

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Further Information

Bargaining Zone Document on Motor Allowances
http://www.unison.org.uk/
bargaining/doc_view.asp?did=258

UNISON Bargaining Information System form on agreements and allowances
http://www.unison.org.uk/
acrobat/W1377.doc

HM Revenue & Customs Specific Deductions: travel & subsistence
http://www.hmrc.gov.uk/
manuals/bimmanual/BIM47701.htm

The Automobile Association Complete Guide for Company Car Drivers
http://www.theaa.com/allaboutcars/
companycartax/index.jsp

Contacts list:

Kevin O'Neil
k.oneil@unison.co.uk

Dave Watson d.watson@unison.co.uk

@ The P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141-307 2572