Fuel related payments / mileage payments

Produced by Tolley in association with Philip Rutherford
Fuel related payments / mileage payments

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Fuel related payments / mileage payments
  • Introduction
  • Reimbursement for business travel
  • (Approved) Mileage Allowance Payments (MAPs / AMAPs)
  • Employers reimbursing less than the approved amounts
  • Advisory fuel rates
  • Passenger payments
  • Lump sum payments
  • Provision of vehicle battery charging
  • Reporting requirements

Introduction

Most employers will make payments to employees in relation to business travel. Among the most common payments in relation to business travel are fuel and mileage payments. If an employer does not reimburse these amounts, then the employee will be able to claim a deduction for qualifying amounts on his P87 or through his tax return.

Business travel includes journeys needed in order to carry out the duties of employment or journeys in relation to necessary attendance; it specifically excludes commuting. For further consideration of what constitutes business travel, please refer to the Travel expenses and Subsistence expenses guidance notes.

Payments to employees in respect of fuel are generally made in one of two ways:

  1. mileage-related payments

  2. lump sum payments

Mileage-related payments are typically calculated by reference to mileage and are known as either:

  1. Mileage Allowance Payments (MAPs) in respect of private vehicles

  2. ‘advisory rates’ in respect of company cars

ITEPA 2003, ss 229–236

Provided certain conditions are met, these amounts can be paid to employees without triggering any reporting requirements or tax charges.

Lump sum payments are covered by the general rules on earnings. A tax deduction in respect of the amounts relating to business travel is only available in respect of a qualifying business journey. See the Travel expenses and Subsistence expenses guidance notes for further details on what constitutes qualifying business travel.

Reimbursement for business travel

Employers may reimburse employees for the costs associated with travelling for business and may include reimbursement for fuel used. As with lump sum payments for fuel, such payments are covered by the general rules on earnings. A tax deduction in respect of the amounts relating to business travel is only available in respect of a qualifying business journey.

If the amounts reimbursed to the employee are within the approved limits published by HMRC, then no liability to tax should arise and there should be no reporting requirements.

HMRC guidance is at EIM31205 onwards.

(Approved) Mileage Allowance Payments (MAPs / AMAPs)

Mileage payments are amounts paid to employees

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