Would someone mind helping on the following please?
I work for a company that pays business mileage (use of own car) at a rate of 30p per mile. There does not appear to be another rate when mileage exceeds a certain amount.
I see that on the Inland Revenue website that the business mileage rate for use of own car is 45p per mile up to the first 10,000 and then 25p per mile thereafter.
We have an employee that on average is doing 2,000 per month. Based on 11 mths per year work( ie less equivalent of 1 months holiday) total mileage would be 22,000 and at 30p per mile would be £6,600. This is £900 less that the employee is being paid if HMRC approved rates were paid. I understand that where a rate lower than the approved rate is paid that the individual can claim the difference ie £900. My question is, how would they go about doing this? I am thinking it will be at the end of the tax year, but would it be on a self assessment form or is there something else that needs to be filed?
If the employee does not fill in a self assessment and the claim is under £2500 then you need to fill in a P87.
If more than £2500 then you must use self assessment and the shortfall is claimed in box 17. (ridiculous form doesn't actually require you to enter the mileage but rather evidence of mileage must be retained for any follow up expenses investigation).
Just to emphasise here that if less than the AMAP rate is paid then the employee is entitled to tax relief on the difference, not a reimbursement of the £900.
i.e.
If paid for their mileage then they would have received £900 towards the running of their car.
If the mileage is not paid and instead a claim made through self assessmnet for the average 20% taxpayer that would equate to tax relief of £180.
In that scenario the taxpayer is £720 worse off claiming through self assessment.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Oops, and thats wjat happens when I take a phone call in the middle of writing a reply!
Hi Alison.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just to emphasise here that if less than the AMAP rate is paid then the employee is entitled to tax relief on the difference, not a reimbursement of the £900.
A few years ago, before I became a bookkeeper, a very good friend of mine put in a claim which equated to around £3000 on mileage done. I said he would get about £600 back but he was insistent that he would get £3000. Even promising his partner he would gave her a grand. You can imagine his disapointment when he opened the envelope and there was a £600 cheque in there. I had no pleasure in being right as I know he had set his heart on that money.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Can almost picture the person excitedly opening the envelope John
I've heard worse misunderstandings like the case of someone who thought that if they were paid less than their personal allowance then the difference would be reimbursed as if that was an amount owing to them rather than an allowance against current period earnings!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In the early days of my business (cripes that was a long time ago - it's just had its 26th birthday!) I well remember having conversations with my step dad whenever I bought something for use in the business (bearing in mind I was - and still am - a sole trader).
He'd invariably ask "But you'll get [the cost of] that back, won't you?"
Er, yes, I will claim it as an expense... from me.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
My limited was born in Feb 1990 so not much younger than your business vince (you've been around 8 months longer by the sound of things).
I've got clients absolutely fixated on buying everything through their business with seemingly no perception that it's their own money that they are spending!
They buy things that they don't really need (or want) in order to save paying tax but they've wasted more than if they had taken the money and paid the NI (as the tax would have been saved anyway by paying themselves).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
There are two key dates. I opened the business bank account on 20th March 1989, and the first transaction on the account (me transferring some of my dosh into it) was on 30th June 1989 - so I use that date as the year end, and consider it the 'official' birthday.
(So in a way, my business is like the queen - it's getting on a bit, and technically it has two birthdays.)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
