The objective of the Approved Mileage Allowance Payment (AMAP) scheme is to support the transport needs of business.
Employees that use their own car for business journeys can be paid the AMAP, free of tax and NIC.
The AMAP rate has been fixed at 40p per mile for what seems like forever (actually 2002!); However, the recent budget announcement changed this. In many people’s eyes it is still not enough to cover fast rising fuel costs; however, that is a different discussion!
It has, from 6 April 2011, increased to 45p per mile for the first 10,000 business miles per tax year; any additional miles can be reimbursed as previous at 25p per mile. If the employer does not pay the full AMAP rate then an employee can claim the additional amount as a tax relief from HMRC, either on an R40 form or through their tax return. The tax free mileage rate can also be paid by charities to volunteers.
Self-employed individuals, whose profits are below the VAT registration threshold (£73k from 1 April 2011), can use the rate as a method of claiming motor expenses in their accounts. You can choose whether to claim actual costs; however, bear in mind that there has to be a change of vehicle before you can change the basis on which you claim motor expenses.
Another key tip is that where an employee takes a colleague as a passenger on a business journey, an additional 5p per mile can be claimed.
Input vat can be claimed on fuel costs incurred by using the fuel advisory rates which are usually updated every 6 months by HM Revenue and customs.
Make sure you are claiming the correct amount of allowances. Also, check out the PAH Accounting resources page for some useful expense claim templates. More information can be found on the HMRC site.