Mileage Claims are something employers and employees often take for granted.
Firstly, What are they?
A mileage claim is where you can claim for tax relief for any mileage used on your personal vehicle for work purposes. This does not include travelling to and from your work unless it’s a temporary place of work.
They key to managing mileage expenses and reimbursements is to only reimburse ‘business-related’ costs.
HMRC states that business related journeys should fall under the following criteria:
- An employee needs to make a trip in order to do their work
- Their work requires them to visit a location other than their normal workplace
For example, attending a meeting, picking up office supplies, or traveling between various company sites.
Business mileage is an expense which reduces the amount of tax paid at the end of the year.
What are the rates?
The current rates for Mileage Claims are as follows:
| First 10,000 business miles in the tax year | Each business mile over 10,000 in the tax year | |
| Cars & vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
You cannot claim a mileage allowance if you are using a company car. However, you can claim tax relief on the money you’ve spent on fuel and electricity for business trips in your company car. You cannot claim any fuel expense/business mileage for personal use of a company car.
To ensure mileage is claimed correctly you should ensure you manage your records correctly by keeping records of the dates and mileage for work journeys, add up the mileage for each vehicle type used for work and take away any amount paid towards the costs (sometimes called a ‘mileage allowance’). Paying your employees above the HMRC-approved Mileage Allowance Payment rates is tax deductible and must be reported on form P11D.
A good way to manage your mileage and simply keep track of your travel would be on a spreadsheet or via a digital mileage tracking app.
Who checks this?
From time to time, some business’ may be liable to an HMRC inspection. This will involve checking that your entire expense claim system is accurate and legitimate, so it is useful to ensure relevant receipts are retained to support the claims, and the amount of expenses recorded in your company accounts or sole trader records match the amount claimed. To avoid fines, it’s important you keep all relevant records and manage claims whether it’s for you as the company director, a sole trader or an employee claiming mileage. More importantly, you don’t want to be paying more than you need to!
It may also be prudent to have a company policy on mileage claims. Ensure that everyone within the business is clear on what they should claim. Also ensure they know how they should claim and where to record it.
A quick case study…
There has been some case law where an employee’s mileage claim was noticed to be higher than usual, which lead to an internal investigation. This resulted in a disciplinary hearing and the employee was dismissed for gross misconduct for falsifying their mileage claims.
The employee argued that difficulty in parking, one-way systems and other road works were the reasons behind the increase in mileage, but the investigation found that after taking into consideration the possibility of these circumstances, the mileage claims were still higher than necessary.
The employee appealed this decision which brought it to an employment tribunal and then appealed to the Court of Appeal against the Employment Tribunal’s decision stating that Employment Tribunal had not considered the internal investigation in enough detail, as not every mileage claim route was analysed.
The Court of Appeal dismissed the appeal against the Employment Tribunal’s decision and found that it had correctly applied the necessary criteria when finding that the employer had carried out a reasonable investigation in the circumstances, despite not checking every claim.
This case study shows the importance of correctly recording mileage claims. Managing claims successfully and appropriately will deter from any problems or possible dispute.
Need support?
If you need any further support or guidance, please get in touch using our online form, or call us on: 0330 400 5490.
A valued member of the Wurkplace team providing administrative and coordinating skills for the HR department and also overseeing the accounts department of the business whilst carrying out key bookkeeping tasks and conducting payroll.
Georgia holds a level 3 in Business Administration and AAT level 2 whilst continuing to work towards gaining a diploma in AAT.