Umbrella contractor mileage allowances - an overview

On the Road

Employees who use their own cars for travelling either in the performance of their duties or to a temporary workplaces are entitled to relief based on pence per mile travelled, writes Bob, the retired tax inspector. 

Unfortunately, it is not possible to claim for actual running costs (including loan interest) so even if you have had a bad year with exceptional expense you are still limited to the authorised mileage rate.

Clearly the journey must qualify for relief and you must travel by car. But although HM Revenue & Customs will tell you that you must travel in your own car this is, in fact, NOT a legal requirement.

Per employment, not per vehicle

The current rates (as of 2011) for mileage allowance are 45p per mile for the first 10,000 miles and 25p thereafter. This applies to each employment, so if you have two employments either concurrent or consecutive you will potentially receive two lots of 10,000 miles at 45p. The bands are NOT per vehicle but are per employment.

First class contractors

An individual is NOT prevented from claiming because an alternative mode of transport is available.  HMRC used to argue that if, for example, there is a works bus and you use your own car for your own convenience, then the claim would fail HMRC’s “necessary” test. If, however, that was taken to the extreme, travellers would be prevented from claiming first class travel as second is available or, for example, forced to claim bus over train as the former is cheaper. The legal point is that it is the journey that must qualify and it is then up to the individual to decide the mode of transport. This extends even to the point of the individual who simply prefers to use his own vehicle.

No relief on car parking

Other costs of the road, such as car parking, are not covered by the Mileage Allowance Relief(MAR), rather they are claimable on the basis of actual cost. A hire car would be based on actual expenditure. Mileage allowance relief is restricted by the amount of any reimbursement but if the employee chooses not to claim reimbursement that does not affect the mileage allowance due.

Easy Rider?

Ever thought of getting out the pushbike?! You can have 20p per mile for that or 24p for a motorbike.

For cars, motorcycles and cycles, the current rates are as follows:

For years 2002-03 to 2010-11

Tax - Rates per business mile
Type of vehicle First 10,000 miles Above 10,000
Cars and vans 40p 25p
Motorcycles 24p 24p
Cycles 20p 20p

For years from 2011-12

Tax - Rates per business mile
Type of vehicle First 10,000 miles Above 10,000
Cars and vans 45p 25p
Motorcycles 24p 24p
Cycles 20p 20p

 

Friday 8th Jul 2011