The rates for business mileage have not changed since 6 April 2011. Although, believe it or not, the average fuel prices for petrol and diesel have actually come down over that same period!
Current mileage rates
Employees using their own cars can still be paid up to 45p a mile for the first 10,000 business miles and 25p a mile thereafter. This is to cover the cost of maintenance and insurance as well as fuel, which may explain why that rate has not come down.
The advisory fuel rates for employees with company cars has changed much more frequently as these only cover the cost of the fuel. These rates are listed on HMRC’s website:
https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax.
If your employee carries another employee on their business journey, they can also be paid up to an additional 5p a mile tax-free.
The big question is, which journey’s count as business mileage?
Business mileage is defined as travel an individual is obliged to make in order to complete the duties of their employment. This does not include ordinary commuting from home to a permanent workplace or private travel.
Travel to and from home to a permanent workplace, where an employee works on a permanent basis as part of their employment duties, is classed as part of ordinary commuting and so is not claimable.
It is possible to have more than one permanent workplace at the same time. If an employee regularly attends a particular location, following a clear pattern (for example the employee work’s there every Monday), this location will also be a permanent workplace.
A temporary workplace is somewhere an employee goes only for a limited duration or for a temporary purpose. As this journey is not ordinary commuting, the mileage for these journeys can generally be claimed.
The 10 mile rule
Where the journey is in a different direction there is no problem, it can be claimed. The rules become more complicated where the journey is along the same route as the employee’s ordinary commute, in substantially the same direction.
If the temporary work place is within 10 miles of a permanent workplace, and along the same route as the ordinary commute, the journey is likely to be classed as substantially ordinary commuting and the mileage would not be claimable.
Examples
For example, an employee’s normal commute is 20 miles. To visit a client, she must travel an additional 12 miles past her office. Although the new route includes her ordinary commute, the whole journey qualifies as business mileage. The journey is considered to be substantially longer because she has travelled more than 10 extra miles.
If the additional mileage in the example above was less only two miles, instead of 12, the whole journey would have not been claimable. Even if she drove a different route the journey would not be claimable because it would be in almost exactly the same direction.
Similarly if an employee visits a client four miles into their five mile ordinary commute, business mileage cannot be claimed. The journey would be classed as substantially ordinary commuting as it is similar in length to her normal commute.
If the visit was four miles along a 20 mile ordinary commute, the distance between the client and the workplace is more than ten miles, the total mileage can be claimed. This is because, although it is along the same route, the journey is considerably shorter than the ordinary commute, and so is not considered to be substantially the same.
As the above examples show, the rules are not always as straight forward as you might expect!
For further information about business mileage claims for employees with company cars or their own personal cars, please contact Ian Meaburn, ian.meaburn@myersclark.co.uk.