It’s a common fallacy that cash options work best for employees with low business mileage, when in practice it’s often the other way around.
HMRC’s Approved Mileage Allowance Payments (AMAP) mean you can pay an employee who drives business mileage in their own car 45p a mile for the first 10,000 miles and 25p thereafter (for NIC purposes you can pay 45p without mileage limit). That can add up to a lot of money, tax and NIC free and with a full CT deduction.
The devil, as ever, is in the detail – there are some things to be wary of, including:
You can pay AMAP alongside a cash allowance but the cash must not vary or HMRC will argue you are caught by Optional Remuneration and they’ll attempt to tax the AMAP as well as the cash.
AMAP, for NIC purposes, must be paid by reference to the pay period that the mileage was incurred, so needs to be paid monthly, and
If you pay less than AMAP the employee can claim tax relief for the difference
A big concern is to ensure that employee’s own cars are properly maintained and insured and appropriate to their job need. Your obligations under the Health and Safety and Road Traffic Acts apply to employees who drive business miles in their own cars.
If you’d like to know more we’re hosting a webinar on Wednesday 3rd June at 10am; “the future of company cars; the definitive view”. Register in advance for this webinar:
After registering, you will receive a confirmation email.