If you or your staff use their personal cars for business travel, they are entitled to claim back a tax free amount. This is to cover the cost of using their own vehicle for business purposes. For 2018, the tax free mileage allowance for cars and vans is 45p for the first 10,000 miles. And then it is 25p thereafter. However, there is a way to claim back a tax free mileage allowance 60p. Are you entitled?
Where employees (including directors of limited companies) have travelled together for a business journey, they are entitled to claim 5p per passenger per business mile for carrying their fellow employees in their car on top of their mileage allowance claim. This is what HMRC calls an Approved Passenger Payment.
An Example of the Approved Passenger Payment
Graeme uses his own car to travel to Birmingham for a client meeting (a 200 mile round trip). He takes his colleagues Mark, Ian and Andy with him. Therefore, he is entitled to a tax free mileage claim of 60p per mile, making his total claim £120. This is made up as follows:
Mileage allowance 200 miles x 45p = £90
Approved passenger payment 200 miles x 5p x 3 = £30
Note: Travel from home to work is not an allowable business expense. So Graeme would only be able to claim his mileage from his office to the client, and the approved passenger payment accordingly.
Are you Entitled to the Approved Passenger Payment?
Whether you can claim the approved passenger payment is up to the discretion of your employer. Therefore, you should speak to them about this and find out their company policy.
Unfortunately, if they do not pay the approved passenger payment, or pay you below the statutory rate of 5p, you are not entitled to claim for a tax rebate. However, you can claim for a tax rebate on mileage if you employer does not pay you for business travel or pays you less than 45p per mile.
Reimbursing employees with the 5p approved passenger payment can be a cost effective way to encourage your employees to travel together for business purposes. This is because it saves the cost of paying mileage allowance of 45p for additional employees travelling to the same place and replaces it with 5p per mile.
The same rules above apply to van drivers. Even if they are driving company vans but are responsible for their own fuel. It may be particularly useful if a van driver drops off employees at different locations.