A leading accountancy and tax firm, plus Conservative MP Jake Berry, have called on the Government to increase the mileage rate that employees can claim when using their own cars for business travel.
Mr Berry has urged the Chancellor to increase the mileage by at least 15p as the present level has been in place for a decade.
Hillier Hopkins LLP have stated that 45p per mile for the first 10,000 miles, after which it reduces to 25p per mile - the amounts currently being claimed - has not kept pace with rising cost of living and no longer covers the cost of fuel, let alone insurance and maintenance.
Natasha Heron - Tax Manager at Hillier Hopkins - stated:
“Given the soaring cost of petrol and increased cost of living, people who rely on their car for work are simply and unfairly being left out of pocket.”
She added:
“Previous governments have eroded the tax benefits of company car ownership to such a point that few employers offer company cars as a benefit. Instead, they choose to reimburse staff for the mileage travelled in their personal cars.
The government should as a matter of priority increase the mileage allowance that employees can claim from their employers, and that rate should be reviewed regularly, perhaps every two years. We would recommend that the rate be increased to £0.90 per mile for the next two years.”
Ms Heron pointed out employers could choose to pay employees more than the current 45p rate - but as this is deemed to be a taxable benefit by HMRC she went on to say:
“If, however, the government were to increase the mileage allowance rate, it would be tax neutral from both the employer and the employee. While this would represent an additional cost for businesses, those costs would be deducted against corporation tax.
It would be a simple and quick way to help employees who have to rely on their car for work in a more targeted way than simply reducing fuel duty.”
David Morrison - a Partner in the Dundee office of EQ Accountants and head of EQ taxation - also stated that the 45p per mile is no longer appropriate and added:
“It should be borne in mind that the mileage rate is not just designed to cover fuel. It also includes other running costs, servicing, financing and the depreciation on the car caused by business mileage.
Traditionally, the fuel only component was a low proportion of circa one quarter to one - third of the mileage rate, though that proportion is on the rise.
With used car prices soaring, the depreciation element might offset some of the fuel cost rise. Nevertheless, it’s clear that the 45p per mile mileage rate is no longer appropriate.”
He added that without a significant rise, employees will increasingly feel out of pocket - saying:
“An up-dated mileage rate model is required to ensure that it accurately reflects the dynamic market.”
