Reimbursement of Business Petrol – Road Tax

Now that I live next to Timbuktu (where is that anyway?) I need to drive to work. My choice of a gas guzzling sports coupe for transport now seems an impractical choice. But no fear because a colleague has also chosen the good life and we are saving the planet by car sharing.

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Mrs Duracell Bunny (DB) has a more practical mode of transport when it comes to providing a taxi service to her children in the form of a people carrier. Although she certainly needs it as she has six year old twins and an eleven month old baby. I thought I had it tough!

Mrs DB

Our first journey to work started fine. After flipping a coin it was DB’s turn to drive which suited me, as I thought I could have a sneaky snooze during the commute. What I didn’t take into account was that DB is perkier than a Duracell Bunny on speed in the morning (hence her name). This is in direct conflict to the Orangu-tang who looks like he’s had his banana stolen sitting next to her.

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Following half an hour of one way chatter answered with the occasional grunt DB thought she would try and drive into the back of a bin lorry (dust cart for the middle class amongst you). Sexist joke interlude:

Scientists have discovered beer contains female hormones. After consuming eight pints you can’t drive and won’t shut up…..

Don’t tell DB or I may be getting a lift to work In an ambulance!

The Tax Bit!

Near the end of the journey the double espresso kicked in and being two tax nerds we discussed whether we could obtain any relief for the journey to work. As usual in the world of tax the answer is depends.

An individual is entitled to claim tax relief under the Authorised Mileage Rates (AMR) as follows:

45p for the first 10,000 miles
25p over 10,000 miles

The first issue is that the journey must be a qualifying business journey. Unfortunately this does not include home to a permanent work place. This therefore scuppers any tax relief for our usual commute but if we were to visit a client at their offices then the journey would be allowable.

If your employer were to reimburse you up to the AMR then these payments will be tax free. If however they do not reimburse you at all or not the full amount then you can make a claim to HMRC to deduct the difference from your taxable earnings*. All pretty straight forward and you can see an example of a claim letter here.

More interesting is that if your journey is qualifying and you car share then your employer can pay you an additional 5p per mile, tax free, for each additional passenger who is also attending the destination for qualifying purposes. An important point to note is that if the employer does not pay the additional rate then there is no scope to make a claim to HMRC. It maybe unfair but whoever said tax was fair!

If you do make a lot of qualifying journeys and car share it maybe worth negotiating with your employer over your salary package as the numbers can mount up! For example if you did 18,000 qualifying miles and regularly gave two people a lift then you could receive an additional £1,800 tax free payment saving £756 in tax and national insurance for a higher rate tax payer.

Although we will be continuing saving money and the planet I will be investing in some ear plugs for future journeys!

 

By Peter Cross

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