With the pre-budget report imminent, Wilder Coe’s Alastair Kendrick raises concerns over possible amendments to the Approved Mileage Allowance Payment.

Since 2002 when the tax rules changed an employer can reimburse employees who use their own vehicles on business travel at the rate of 40p per mile for the first 10,000 miles in a tax year and 25p per mile for any mileage above this rate. If an employer pays in excess of this amount then that excess would give rise to tax and NIC. If an employer pays below this level then the employee can claim tax relief on the difference between the amount reimbursed and the Revenue limit

This arrangement which is called the Approved Mileage Allowance Payment (AMAP) replaced an arrangement which allowed the rate to vary depending on the cc of the car the employee drove. In addition employees could make a personal tax claim on the difference between the actual cost and the allowance paid (without ceiling).

Since the introduction of AMAP many employees are out of pocket

It was suggested at the time of the spring budget that the Chancellor may consider reducing the level of AMAP that would be paid. Thankfully nothing was introduced in the budget but again there is speculation that this may occur in the autumn statement.

It would be our view that there is no case to reduce the rates with many employees incurring significantly more than 40p per mile to run their vehicles on company travel. If the rate of AMAP is reduced then employers are likely to be faced with having to meet the tax/NIC on the excess.

It is interesting that a large population of the employees who would be impacted by these changes are within the public sector.

I urge the Government to consider carefully the impact of any reduction in rate and to consult with employers further before implementing any revisions.