You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
I took a job on 7 months ago, with a car allowance, which I've had before so fairly ofay with them.
Unbeknown to me, i'm the first to have an allowance and most of my colleagues have company cars.
I get paid 15ppm and now the fuel is 143.7 a litre i've done some calculations and i'm now (in some cases) out of pocket. When the allowance was set at 15ppm the company were looking at an AMR of 11p and the 4p excess was a buffer. That buffer has now gone.
I cover the whole of England and now expected to cover some big trips. I understand I can claim the difference back next year, but i'm trying to work out how much I will get back as well as how much it costs the company.
My HR director states that the company can't claim tax relief on what they pay me? My understanding is they can claim up to the 45/25ppm that they pay me. My argument is why should I have to be out of pocket when they can move the threshold up and in reality they are no worse off.
Also, i note the rebate increases when the driver is on 40% tax. Does that come into effect as soon as the income level reaches that and is it only for the mileage recorded when they are at higher rate?
thanks in advance
Best place to check is HMRC site as that gives the max rate payable with no tax implication. IIRC there is a lower rate if people have an allowance.
If the company pays less than the HMRC rate you can claim the shortfall, but only to set off vs tax income. So if they pay 30p less, you reduce your taxable income by 30p so only get the benefit of tax rate x 30p.
The higher HMRC rate is restricted to the first 10,000 miles too.
Not sure what the HR bod is saying- what they pay you as allowance & fuel is an expense for the business so reduces their profit hence tax too.
The HMRC rate is to cover wear, tear and fuel if your car is used for business- hence a lower rate for co car/allowance bods you don’t have wear & tear to worry about. It won’t change due to short term fuel increases but I think it hasn’t moved for years
Hi, you can claim the 45p/mile up to the first 10,000 miles in your tax return. It’s a lower rate after. Google should give us an answer.
You have to offset that against the 15p/mile you actually get.
You then get tax relief on the difference.
So say it’s 10,000 miles in the year, your net claim is 10,000x£(.45-.15)=£3,000.
What you actually get for that is your marginal tax rate so if you’re a 40% tax payer you get £1,200 back.
Note this is done on an annual basis with your tax return, not month by month.
Soory guys, I think i haven't explained my question corectly. I'm fully aware of all of the above.
My question is really, can the COMPANY reclaim tax/offset the 15ppm they pay me?
My HR woman is saying they can't, so hence they want to pay us as little as possible and we claim the rest back from HMRC.
My argument is that if they CAN, then they should really be paying me a bit more. example being they pay me 20p per mile and clain their tax relief and I claim the relief on the other 25p/5p 10k onwards
Effectively yes. The company makes profit on which they pay tax and whoever owns also pays tax. If they pay you more money, for any reason, they make less profit, and thus pay less tax. IE a grand extra to you would only cost them £810 cos they're not paying 19% corporation tax
Basically, they're being tight arses.
I work for an equivalent company, first time I've not got paid the HMRC standard rate in +35 years. Unfortunately it's a FTSE100 with 190,000 employees so they ain't going to change and even in our Expenses Policy it details how to claim the tax rebate back.
Anything they pay you up to the HMRC rate is set against their costs/taxes.
TBH I make sure I only drive on their time, not mine - and only use my car when I choose to, and it suits me.
I'm in the same boat, before the rises I was out of pocket to the tune of about 1p per mile. I questioned it and was told that people with a car allowance get the HMRC rate that company car drivers get which in principle is fair, the 45p rate includes depreciation and other running costs etc. which are covered by either the provision of the company car or car allowance. It's the stingy government rates based on engine size that are wrong.
https://www.gov.uk/guidance/advisory-fuel-rates
As said you can claim the tax back on the difference. As far as HMRC are concerned there is no such thing as a car allowance, it’s just taxable salary hence you can make the tax claim. The other benefit for employers is that car allowances are a way of paying you non pensionable pay
And it’s excluded from any payrises. I’ve not worked for any company that has ever increased the allowance, despite changing car costs.
Check the rates for each type of engine, small diesels suffer, larger petrol better if you can get a more economical one (comparatively) Mercedes or BMW seemed to work IIRC
An apprentice got a 1.6D Insignia and was paying to do company mileage, scandalous
My question is really, can the COMPANY reclaim tax/offset the 15ppm they pay me?
If you mean can they recover all of the amount they pay you in tax - no. If they pay 20% corporation tax then they’ll reduce their tax bill by 20% of what the my pay you - assuming of course they are making profit and not burying it somewhere else.
Way back at my last place I used to get 18p per mile which was comfortably enough to cover my fuel costs. We got bought and merged and moved onto rates (set by the government) based on engine type and size in cc. So my 2.0D rate went from 18p down to 11p. It’s supposed to be a level that flexes with rising and falling fuel costs but ultimately unless you are a super economical driver or have cheaper fuel then it’s barely enough to cover the mileage. Also obviously depends on where your driving is - motorway miles are fine but crawling around towns not so much.
It’s stingy but perfectly allowable.
A >2 litre petrol engine that can do mid thirties mpg and you make c5p a mile if I remember the spreadsheet I did
So my 2.0D rate went from 18p down to 11p. It’s supposed to be a level that flexes with rising and falling fuel costs but ultimately unless you are a super economical driver or have cheaper fuel then it’s barely enough to cover the mileage. Also obviously depends on where your driving is – motorway miles are fine but crawling around towns not so much.
I hava a Mercedes E Class E220d and I measured two trips. Trip A was a 220 mile motorway trip to the office, I got 51mpg and I was about £3 up on the repayment. Trip B was a 50 mile round trip into Manchester and back, I got £7.50 back and the car did 41mpg and it cost £8.20 in fuel based on the tank I'd just filled at the cheapest station which is now £1.42 a litre.
Ah, I think I've figured out what's going on here. When a company pays you expenses, it's covered by a dispensation from HMRC that means those expenses don't get taxed - i.e you don't pay tax on those payments. Under that dispensation, HMRC limits the amount a company can pay, to 45p a mile for private cars, or to an amount based on fuel type and engine size for company cars or those on a car allowance. This amount is updated as fuel prices change, but it's always a bit marginal, and there is always a lag. So when HR says they cant claim tax relief, what they mean is that if they paid you more, you would be taxed on it, not the company.
Ah, I think I’ve figured out what’s going on here. When a company pays you expenses, it’s covered by a dispensation from HMRC that means those expenses don’t get taxed – i.e you don’t pay tax on those payments. Under that dispensation, HMRC limits the amount a company can pay, to 45p a mile for private cars, or to an amount based on fuel type and engine size for company cars or those on a car allowance. This amount is updated as fuel prices change, but it’s always a bit marginal, and there is always a lag. So when HR says they cant claim tax relief, what they mean is that if they paid you more, you would be taxed on it, not the company.
They're paying me 15p a mile, so for them to up that to 20p should'nt affect them. Tehy'll claim tax relief on their 20p and i will on the rest up to 45p <10k 25p 10k> onwards.
My partner has a car allowance too and she has to submit VAT reciepts so her company can claim the VAT back on the business portion. My company aren't interested, the FD says her finance team haven't got time to add another process.
They’re paying me 15p a mile, so for them to up that to 20p should’nt affect them
No, it won't affect them, it will affect you. That payment will be taxable (meaning you will have to pay tax and NI on it) if it exceeds the HMRC approved rate. See here -
https://www.gov.uk/guidance/advisory-fuel-rates.
They’re paying me 15p a mile, so for them to up that to 20p should’nt affect them. Tehy’ll claim tax relief on their 20p and i will on the rest up to 45p <10k 25p 10k> onwards.
They don't get any tax relief. If they increase the amount they pay you from 15 to 20p they will be 5p out of pocket. If that affects their profits by 5p then in round numbers they'll pay 1p less corporation tax, but still be 4p less well off. (and since many companies are measured on EBITDA (before tax profit) rather than net profit the shareholders will not be happy!).
YOU can claim tax relief on the difference between HMRC rate and company rate. Its a bit of a PITA but if your miles are high enough it will be worth doing self assessment to do this. You'll only get tax back on the difference though - so for your first 10K miles that's a reduction in taxable income of 30p/mile; if you pay 20% tax that's 6p mile in your pocket, obviously better if you are a higher rate tax payer.
HMRC limits the amount a company can pay, to 45p a mile for private cars, or to an amount based on fuel type and engine size for company cars or those on a car allowance
Nope. I've worked many jobs where I got the full 45ppm and had a car allowance.
People get confused with 'car allowances', it's an internal thing for a company and just income to HMRC.
They don’t get any tax relief. If they increase the amount they pay you from 15 to 20p they will be 5p out of pocket. If that affects their profits by 5p then in round numbers they’ll pay 1p less corporation tax, but still be 4p less well off. (and since many companies are measured on EBITDA (before tax profit) rather than net profit the shareholders will not be happy!).
YOU can claim tax relief on the difference between HMRC rate and company rate. Its a bit of a PITA but if your miles are high enough it will be worth doing self assessment to do this. You’ll only get tax back on the difference though – so for your first 10K miles that’s a reduction in taxable income of 30p/mile; if you pay 20% tax that’s 6p mile in your pocket, obviously better if you are a higher rate tax payer.
We're looking at £2m profit this year on £14m turnover, we're not strapped for cash. We have only a few shareholders and they're happy because we're growing very quickly, profitably and targeting to grow to £28m by end of 2023.
I'm just amazed they are so tight about the pence per mile being raised. I have to maintain my car and wait a year for a rebate, but they won't pay a little more in mileage despite the fact i'm bringing in £500k of profit this year alone.
Gross or net profit?
How do you think they attain those numbers- penny pinching where they can!
Ask the company about doing a true up. At my place they do a biannual true up. If you evidence your fuel price and average mpg and can show the hmrc rate did not cover your fuel cost they will refund you the difference. Ok you are out of pocket for a few months but at least not permanently.