Professional Freelancers and Contractors can claim a tax free
payment for the costs of their business journeys made in their own
vehicle.
HMRC publish set rates for payments to employees ( and director's of
Limited Companies) to reimburse the cost of the employee using their
own vehicle for business related travel.
For the travel to be business related then the travel should be to a
temporary workplace, please see our detailed guidance on the definition
of a temporary workplace and the 24 month rule.
The legislation, Sections 229 to 236 ITEPA 2003, defines both "MAP"
, Mileage Allowance Payments and "AMAP", the Approved Mileage Allowance
Payments.
MAP - Mileage Allowance Payments
HMRC issue detailed guidance explaining what an MAP is at EIM3210 , but briefly a MAP is a payment to cover the costs of travel in a vehicle on a business journey.
AMAP - Approved Mileage Allowance Payments
The HMRC detailed guidance on AMAP's is at EIM31230 which explains that the legislation gives a statutory exemption to tax for AMAP's under two conditions:-
- The payment is a MAP
- The amount of the payment is within the rates set out for the tax year in which the journey is made for that type of vehicle.
The amount is also defined as "Miles" X "Rate" . Where Miles is the
number of miles travelled by an employee who is not a passenger, and
Rate is the rate applicable to the vehicle.
Payments made using the AMAP Scheme do not have to be declared on a P11D.
Rates
The rates given are the maximum that can be paid free of tax. Any
payments above the Approved rates are taxable, and an employer can pay
less if they so wish.
| Kind of vehicle |
Business miles |
2002/03 onwards |
| Car or van |
first 10,000 |
40p after that 25p |
| Motor cycle |
|
all 24p |
| Cycle |
|
all 20p |
An important point about these rates is made by HMRC in EIM32140
Business mileage and mileage allowance payments (MAPs)
for all vehicles within the same kind are merged as though they related
to a single vehicle, but separate calculations are made for each
different kind of vehicle.
Two or More Employments
EIM31280
provides guidance on more than one employment taken by the employee who
uses the same vehicle. In these cases each employment has its own
10,000 miles first limit, in other words each employment is treated
separately.
This will not be the case where the two employers are associated, by association HMRC explain that:-
one employment is associated with another if:
- the employer is the same
- the employers are partnerships or bodies and an individual or another partnership or body has control over both of them, or
- the employers are associated companies within the meaning of Section 416 ICTA 1988
So for instance in the case where a Professional Contractor or
Freelancer works for an umbrella company for some time in the tax year
and claims mileage, and then decides to go into business on his own
account , forming a Limited Company, even if the contract is on the
same site as the umbrella company contract, a new 10,000 mileage
allowance will be applicable to the Limited Company.
Record Keeping
EIM31390
and Sections 229 and 230 ITEPA 2003 are clear about record keeping
requirements, and it is essential to have "reasonable evidence" to
support claims.
If your business journey is the same each day then you do not
necessarily have to measure the mileage every day: measure once and
record how many days you made the journey by recording the destination
on your report sheet.
If you want the "belt and braces approach" , then keep all your fuel
receipts and store them in an envelope per month. This adds weight to
the evidence you are keeping that you incurred costs and made the
journeys. For instance using a petrol station on the journey is very
good evidence of the journey having taken place as the receipts has the
name of the petrol station, date and time on it. You may think this is
"overkill" but if an HMRC inspector really wanted to challenge the fact
that you made the journey, what better evidence to have collected ?
Passengers
EIM31405
confirms that if you carry passengers for the journey as long as the
journey is also business mileage for the passenger and the passenger is
an employee of the company also, you can claim an additional rate of 5p
a mile.
VAT
HMRC publish advisory fuel rates
updated biannually for changes in fuel costs. These rates are used for
the employer to reclaim VAT on mileage expenses paid to the employee.
You are required to retain receipts to prove the purchase of the
petrol. The amount of VAT reclaimed cannot be higher than the total
VAT that has been paid on the petrol.
The VAT reclaimed is the VAT on the advisory mileage rates which are shown below.
| Engine size |
Petrol |
Diesel |
LPG |
| 1400cc or less |
10p |
11p |
7p |
| 1401cc to 2000cc |
12p |
11p |
9p |
| Over 2000cc |
17p |
14p |
12p |
From 1st July 2009 the new rates will be:-
| Engine size |
Petrol |
Diesel |
LPG |
| 1400cc or less |
10p |
10p |
7p |
| 1401cc to 2000cc |
12p |
10p |
8p |
| Over 2000cc |
18p |
13p |
12p |
For periods where the VAT rate is 17.5% the VAT Fraction applied to
the rates above is 7/47 and for periods where the VAT rate is 15% then
the VAT fraction applied is 3/23.
EG. Vehicle of 1399cc Petrol, the advisory fuel rate is 10p and the VAT at 3/23 is 1.304 p per mile.
If your company operates the Flat rate Scheme for VAT, you cannot claim VAT on mileage payments.