Employee mileage allowance when given car allowance

[lexusit]

As a company director myself I'm pretty sure I'm right here....

Wife started a job where the salary wasn't great but £200 a month car allowance. Got told yep then its 45p a mile.

Turned out to be 20p a mile. Told her she can claim the extra 20p off HMRC - wrong wrong wrong. You can claim the shortfall as a tax allowance. So basic rate taxpayer 25p x 20% = 5p off the HMRC.
Employer swore blind no they were right so wife dropped it. 25p was doable. Am I right?

Today shes been told that it was wrong and because her car is a certain engine size its 9p a mile now. Because she gets a car allowance!

Now I understand companies car pay 1p a mile if they so desire but they're using the excuse that HMRC have told them they've got to do this. This is wrong, isnt it? That rate is for company car drivers not drivers with a car allowance?

Its worrying what sort of accountants this company employs to be honest.

 

[Paul Kelly ICHYB]

What does her contract say?

The 45p per mile (up to 10k) would normally cover all expenses. If she gets an allowance and mileage, the mileage might reduce as they are covering the cost of the vehicle in the allowance.

 

[lexusit]

What does her contract say?

The 45p per mile (up to 10k) would normally cover all expenses. If she gets an allowance and mileage, the mileage might reduce as they are covering the cost of the vehicle in the allowance.

"Where you use your own car for travel on Company business, the Company shall reimburse you in respect of fuel costs for business miles at the Company's applicable business mileage rate."

Of course, understood that most people get 45p when they get no car allowance so less is to be expected.

First expenses claim 20p a mile. Wife did say "but you told me it was 45p a mile before I accepted the job". This is where they incorrectly claimed that HMRC would pay the extra 25p.

Let that one go as a genuine misunderstanding.

Got paid 20p a mile for 4 months - about 4000 miles. Out of the blue, they asked for car make and model and have said its been incorrect and rate is 9p. Because "HMRC won't let them pay any more" which is rubbish.

It it had been quoted as 9p plus car allowance up front then, you take it or leave it of course. BUT, this is a strange way to behave.

 

[WaveJumper]

As mentioned above what does her contract say. Personally, I thought the allowance / mileage schemes were pretty straight forward these days. Have a read here for some clarification

https://croner.co.uk/resources/pay-benefits/car-allowance/
https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax

 

[WaveJumper]

This wouldn't happen to be a care provider by any chance?

 

[Paul Kelly ICHYB]

Again, what does her contract say? If not specified, is it written in the job offer?

What about the £200 a month allowance?

A company can choose to offer whatever scheme they want. A variable mileage allowance would normally be used where a company pays a contribution towards the vehicle.

 

[lexusit]

"Where you use your own car for travel on Company business, the Company shall reimburse you in respect of fuel costs for business miles at the Company's applicable business mileage rate." is whats in contract.....

Appreciate they can pay what they want and if you get car allowance then you probably should expect less.

BUT intially they said 45p a mile, then in practice they said 20p a mile but HMRC will pay the extra 25p so it is 45p.

Now they are saying HMRC have told them they can pay a max of 9p a mile based on the car because of the car allowance which I think is wrong...... They can pay what they like.

 

[lexusit]

This wouldn't happen to be a care provider by any chance?

How did you guess? Yep 3rd party company contracted to provide NHS services.

 

[lexusit]

I don't have a problem if they said upfront £200 a month allowance then 9p a mile. They didn't they said 45p.

They've been paying 20p for 4 months now and suddenly said they're not allowed.

Seems very dishonest. Misleading staff into thinking they can claim the entire 25p shortfall from HMRC, then telling them HMRC won't let them pay more than the company car rates. Not honest at all.

 

[lexusit]

So can someone confirm? If you get a car allowance the employer can still pay what they like (up to 45p)?

i.e. they're not forced by HMRC to only pay the low company car rates?

 

[WaveJumper]

As far as I am concerned a car allowance is just that and allowance for you to be buying, renting or hiring a car to do your job. The actual mileage allowance is something completely different. If your wife's contract say's clearly they are paying a car allowance and then 45p a mile to me thats what she should be getting. It sounds like they are back tracking on everything offered

 

[lexusit]

Cleverly contact just says "applicable business mileage rate".

Which is why she tried to clarify this before starting. They said 45p verbally.
Then when it was 20p for first claim, she had an email discussion with manager who tried to tell her HMRC would pay the extra 25p.

Only after 4 months have they said it should be 9p.

Accidental due to complete uselessness on their part or deliberate attempt not to admit it was only 9p. Who knows?

 

[Scalloway]

As I understand it a car allowance is taxable on the employee, therefore the employee should be able either to receive 45p per mile or claim tax relief from HMRC.

https://www.gov.uk/tax-relief-for-employees/vehicles-you-use-for-work

 

[WaveJumper]

@Scalloway doe this mean what ever an employer pays regarding mileage ie 9p a mile you can claim the difference back up to the 45p on the first 10,000 miles

 

[Scalloway]

If you look at the link I gave it says you can claim the difference.

 

[NicoJ]

You're absolutely correct. My initial thought was that I hope they haven't put a BIK on her pay as they seem to be muddling company car with car allowance.

 

[lexusit]

If you look at the link I gave it says you can claim the difference.

No not at all. Only tax relief on the difference..... i.e. you dont pay tax on the difference.

So if employer pays you 25p, you can get tax relief on 20p. Basically, 20p you dont pay tax on.

For a basic rate taxpayer thats 20% so 20% of 20p = 4p

So HMRC DO NOT make it up to 45p

 

[lexusit]

As I understand it a car allowance is taxable on the employee, therefore the employee should be able either to receive 45p per mile or claim tax relief from HMRC.

https://www.gov.uk/tax-relief-for-employees/vehicles-you-use-for-work

Correct its treated like an extra lump of salary.

If employer decides to pay you 1p a mile, then yes you can claim tax relief on 44p. For a basic rate tax payer that only works out as 8.8p you save in tax,

 

[lexusit]

If you look at the link I gave it says you can claim the difference.

"Tax relief" on the difference not cash.

i.e. we'll let you off paying tax on this amount so it saves you possibly only 20%