Everything you need to know about mileage allowances

by Faustine Rohr-Lacoste | April 19, 2018

Almost every company incurs travel costs for business trips and other work-related driving. Especially the latter can quickly stack up when you’re dealing with lots of employees who are constantly hitting the road — and that’s exactly why there are mileage allowances. 

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Now that you’ve figured out which categories to cover, how update your expense policy and set it up for travel purposes, it’s time to learn more about mileage allowances — what are they and how do you define them for your company?

A certain ‘approved amount’ of Mileage Allowance Payments, or MAPs, can be paid out without having to be reported to the tax authority, which is meant to offer an economical way for businesses to invest in the travels of their employees.

When do trips qualify for tax-free mileage allowances?

It’s easy to know if trips can be counted against the set amount of mileage allowance that’s exempt from taxes — they just need to pass the following tests to see if they have a business character.

According to the HMRC, trips are seen as business-related when: 

  1. The work can’t be done unless the trip is made
  2. The employee needs to be somewhere other than the usual workplace to carry out the job

Also, journeys are exempt from the ruling if they:

  1. Are part of a daily commute between an office and a private residence, or any other place that’s not a permanent office
  2. Are extremely short, for example down the road
  3. Don’t have an obvious work-related character
  4. Are private journeys with one or two work-related stops — it’s all about the primary purpose of the trip

Calculating your mileage allowances

It doesn’t matter if you have people occasionally making a trip using their own car or are using it constantly — keeping track of their mileage can quickly get messy. Luckily, there are are very clear rules in the UK about turning MAPs into valid tax-exempt reimbursements, also known as the ‘approved amount’. 
For the first 10,000 miles, cars and vans are eligible for 45p per mile, and all travel is at a rate of 25p per mile. For motorcycles and bikes, the rates are the same for all travel — it’s always 24p for motorcycles and 20p for bikes. If it’s still unclear, or if you have a hard time calculating how much you can save on taxes, check out the official working sheet for the right mileage allowances.

It’s important to note that if the company doesn’t cover the full ‘approved amount’, your employees can apply to get Mileage Allowance Relief for the unpaid part.

Keeping track of mileage allowances

Just like many other things related to taxes, you won't be able to get anything refunded from HMRC if you don't carefully log the trips you make. Keeping a mileage logbook doesn't have to be complicated, however – you just need to follow some simple rules.
All journeys need to be logged with a date, purpose (business or personal), start point, destination and total miles travelled. While HMRC doesn't require companies to file detailed logs every year, you do need to keep them for at least five years after the yearly tax submission date, as you can be requested to show them during an inspection.

If you manage a large number of employees, consider giving them access to a centralised platform for mileage registration. This could help with a more streamlined approach to gathering data, and makes it easier for the administrative department to file tax returns. There are all kinds of solutions for this – mobile apps like MileIQ use GPS to track the exact amounts for regulatory purposes, while a platform like Spendesk can take care of indexing all reimbursements. 

Alternative travel and mileage allowances

While car travel is by far the most popular form of using private vehicles for business travel, it’s definitely worth considering putting forward alternative ways to travel for business transport.
If your employees make lots of inner-city movements, for example, it’s smart to focus on cycling as their main mode of transportation. For longer distances, there might be lots to gain from carpooling – not only is it more cost-efficient, it's also the environmentally friendlier option.

Spendesk is perfect for managing any travel allowances, boasting a rich feature set that’s perfectly tuned to your company’s needs. Try it for yourself and get started with our free trial today.

Download our free expense report template


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