Fuel-related payments / mileage payments

Produced by Tolley in association with Philip Rutherford

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
  • (Approved) Mileage Allowance Payments (MAPs / AMAPs) for private vehicle drivers
  • Tax, NIC and reporting for amounts in excess of AMAPs
  • Employers reimbursing less than the approved amounts
  • Advisory fuel rates for company car drivers
  • Agreeing higher rates
  • Passenger payments
  • Lump sum payments / round sum allowances
  • Claiming a deduction for travel when employer provides a lump sum
  • More...

Fuel-related payments / mileage payments

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 a P87 or through their tax return (see the Expenses guidance note).

Business travel includes journeys an employee needs to make 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. Approved Mileage Allowance Payments (MAPs or AMAPs) ― paid only in respect of private vehicles. These include rates for mileage in a car or other vehicles, as well as rates for carrying passengers

  2. advisory fuel rates ― paid only 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 or NIC costs.

Lump sum payments are covered by the general rules on earnings. A tax deduction for costs 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.

(Approved) Mileage Allowance Payments (MAPs / AMAPs) for private vehicle drivers

Mileage payments are amounts paid to employees for the business use of their personal vehicle. Business use is when the employee uses the car for business travel, as described above.

HMRC guidance is at EIM31205 onwards.

It is worth noting that these rates do not apply to:

  1. private travel costs met by an employer, such as private fuel

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