Company Cars Business and Private Mileage claims.

[flango]

Hi All

I wonder if one of you can help me with this one as I know there are some tax / HMRC specialists out there.

My neighbour has just been to see me he runs a Ford Focus econetic estate 1.6d (basically same car as my Volvo) and his company has just changed the way he funds his private mileage.

Previously he just claimed his business miles as a company car at HMRC rates any private fuel (including commuting) was paid for by him out of his own pocket, which is fair enough all round.

Now the Comany have changed the policy so that business miles are paid at HMRC rates but he is required to pay for his private fuel based on the number of miles he covers x HMRC rates. He has a fairly long commute to his office in Nottingham (80 mile / day) so based on the following my calcs are

Weekly commute = 400 miles
Weekly Business Miles = 100 miles

Under his old system he would simply claim 100 miles x 11p = £11
Leaving 400 miles to be paid for out of his own pocket.

400 miles /58 mpg = 6.9 gallon X £5.68 gallon = £39.19

Total Fuel bill for week = £50.19

New system

Business mileage remains unchanged as does rates so still £11

Private Mileage now 400 miles x 11p = £44

Total fuel bill for week £55 an Increase of £4.81 or +9.6%

looking at his private mileage bill that has increased £5.81 per week or +14.8%

Surely he can't be expected to see a rise in his own private fuel costs whilst his employer (multinational) profits from this?

All views welcome but if the 2 amounts (private + Business) amounts to more than paid for the fuel (on a company credit card) how does this fit with taxation and profiteering laws?

Must admit this came as a new one to me and actually penalises Eco cars the government are trying to promote.

 

[markjay]

I am not sure I fully understand his circumstances...

Under HMRC rules you can not claim any business mileage for commuting to and from a fixed place of work.

It is only when he uses his private car for business purposes - e.g. to see clients, to drive to a conference, to deliver goods - that he can claim the mileage.

So the long daily commune to Nottingham is not eligible for tax-exempt mileage anyway. Not sure how his employer managed to get away with it so far.

 

[flango]

I am not sure I fully understand his circumstances...

Under HMRC rules you can not claim any business mileage for commuting to and from a fixed place of work.

It is only when he uses his private car for business purposes - e.g. to see clients, to drive to a conference, to deliver goods - that he can claim the mileage.

So the long daily commune to Nottingham is not eligible for tax-exempt mileage anyway. Not sure how his employer managed to get away with it so far.

No you misunderstand me or its probably me as my brain is mush at the min as I'm a bit under the weather.

Currently he pays for all the fuel on his credit card and only reclaims the £11 incurred on business mileage. The commute to and from work comes out of his own pocket as you say.

New policy all fuel is paid for by corporate credit card but mileage is booked at HMRC rates

So under the new system he has to pay the company 11p per mile private mileage and they reimburse him 11p per mile business mileage, which costs him nearly 15% more per week.

 

[wemorgan]

Maybe he loses out now but with increasing fuel prices he might make a small profit by the end of the year.

 

[davidjpowell]

So the answer is that he needs something that uses more fuel to be a winner?

I used to find that the HMRC mileage rates used to leave me out of pocket, presumably that is why the change in policy.

It's going to be a nightmare to administer properly if you have to put down every private journey.

He needs to have a chat with his line manager - perhaps there is something they can do to even things out somewhere (or his journey to work suddenly becomes a few miles less).

 

[flango]

So the answer is that he needs something that uses more fuel to be a winner?

I used to find that the HMRC mileage rates used to leave me out of pocket, presumably that is why the change in policy.

It's going to be a nightmare to administer properly if you have to put down every private journey.

He needs to have a chat with his line manager - perhaps there is something they can do to even things out somewhere (or his journey to work suddenly becomes a few miles less).

He thought of that one but you have to fill the speedo mileage in on the expense claim + it's all checkable so if he did this he would falsely be claiming business miles which would be fraud.

 

[davidjpowell]

Sounds like someone is putting there hands in their pockets then - either him or his employer? How well loved is he will be key I suspect.

I wonder if senior management have some gas guzzlers or similar?

 

[markjay]

I see your point...

However, the HMRC rate is not 'fuel rate' as such - it is a rate to cover the overall cost of use of private vehicle, and therefore is usually higher than just the fuel (taking into account such items as servicing and wear).

So while it makes perfect sense for the company to pay him for private use of his car based on HMRC rates - which as said are deliberately higher than the net cost of fuel - is fine, paying back to the company based on HMRC rate is unreasonable. He should only pay back to the company the actual cost of fuel used - and this has nothing to do with HMRC rates.

 

[davidjpowell]

I see your point...

However. the HMRC rate is not fuel rate as such - it is a rate to cover the cost of use of private vehicle, and therefore is usually higher than just the fuel (taking into account such items as servicing and wear).

So while it makes perfect sense for the company to pay his for private use of his car based on HMRC rates - which as said are supposed to be higher than the fuel cost - is fine, paying back to the company based on HMRC rate is unreasonable. He should only pay back to the company the actual cost of fuel used - and this has nothing to do with HMRC rates.

HMRC have several rates. This is a rate for company car drivers and should one cover fuel cost so is a lot lower than the rate for using a privately owned vehicle. If he could claim 45p a mile, I suspect that he would not be complaining!

 

[markjay]

HMRC have several rates. This is a rate for company car drivers Petrol so is a lot lower than the rate for using a privately owned vehicle.

I see (again...).

But still I don't understand - if the company is paying for his private fuel by company credit card - why shouldn't he simply pay back the actual cost of the fuel he used privately? What do HMRC rates have to do in this case, as no tax exemption is claimed against this expense?

Let's say the company paid for three days in a hotel, but only two of which were for a conference, while the third day was the employee's choice and not work related, the employee would than have to pay back to the company the actual cost of the third day. But this has nothing to do with HMRC rates?

We are not talking about private mileage covered in a company car? It is his own car?

 

[flango]

I see your point...

However, the HMRC rate is not 'fuel rate' as such - it is a rate to cover the overall cost of use of private vehicle, and therefore is usually higher than just the fuel (taking into account such items as servicing and wear).

So while it makes perfect sense for the company to pay him for private use of his car based on HMRC rates - which as said are deliberately higher than the net cost of fuel - is fine, paying back to the company based on HMRC rate is unreasonable. He should only pay back to the company the actual cost of fuel used - and this has nothing to do with HMRC rates.

HMRC rate is just a fuel rate for both mileages when its a company car

 

[flango]

We are not talking about private mileage covered in a company car? It is his own car?

No it is private mileage in a company car, apologies for any confusion.

 

[gIzzE]

It is not a private vehicle though, it is a company car. Hence the 11p rate rather than 40p.


It sounds to me that the company has changed the rules to suit them, and I doubt he will be able to do anything about it.

 

[gIzzE]

I would love this, if it cost me 11p per mile no matter what I drove I would be chopping in my 1.6d and ordering a nice V8.

I bet the company rethink this policy after the next round of new company car orders.

 

[flango]

I would love this, if it cost me 11p per mile no matter what I drove I would be chopping in my 1.6d and ordering a nice V8.

I bet the company rethink this policy after the next round of new company car orders.

They thought of that one no car over 2 litres for which they charge you 16p per mile (diesel) or 22p per mile (petrol) so you are still on a loser.

 

[Dryce]

It sounds to me that the company has changed the rules to suit them, and I doubt he will be able to do anything about it.

I don't think so.

This would suit the staff running thirstier cars and penalise the company.

My jaded experience of company car policy and senior management is that those empowered to affect policy will have seen it rather personally as being 'for the good'.

One might assume therefore that as fuel prices have risen the 11p threshold has been well passed by a number of company car running decision makers who have thought that a change would be for the good of everybody.

 

[markjay]

OK... so he is driving a company car then? Not his own vehicle? And the question is how much should he pay back to his employer for private use (e.g. commuting) of the company car? Am I getting any closer?

 

[flango]

OK... so he is driving a company car then? Not his own vehicle? And the question is how much should he pay back to his employer for private use (e.g. commuting) of the company car? Am I getting any closer?

correct under the old policy it would have been £39.19 under the new policy it will be £44 so his employer would make a profit on him from his private miles, surely this can't be right?

 

[gIzzE]

I don't think 11p per mile can really be moaned at, it is seriously cheap motoring.

The BIK tax on that car must be small too with only 99g/km, so probably £40 a week at the higher rate, so around £85 all in to do 400 miles a week.

How much can he hire one for?
When you add that to insurance, tax, fuel is he better off with a company car or not?

 

[flango]

I don't think 11p per mile can really be moaned at, it is seriously cheap motoring.

The BIK tax on that car must be small too with only 99g/km, so probably £40 a week at the higher rate, so around £85 all in to do 400 miles a week.

How much can he hire one for?
When you add that to insurance, tax, fuel is he better off with a company car or not?

Its more a principle thing, why should his employer profit from him? BIK is about £25 per week at higher rate.

If you do the maths then a fair rate where no side would profit or gain would be around 10p per mile. If you are doing 20k per year private mileage it all adds up.

I think he would be better getting out of the company car scheme at the first opportunity, if he can