Private Car Mileage Allowance Plus Mileage Rate

[Steve Murray]

Hello,
I work for a small company and use my own car for work. My Contract of Employment states that I would get my basic salary, plus a car allowance, plus a mileage allowance at the Inland Revenue approved rates. I believe that the rates for private car use is 40ppm for the first 10,000 miles and 25ppm thereafter.

The company accountant says that because I am being paid a car allowance, I and the company could be more heavily taxed if they pay me the 40p & 25p, and so I am only being paid the 11ppm company car user rate?

I beieve that the Inland Revenue would consider the 'car allowance' as just an additional part of my salary, and I am paying tax on it at the basic rate. If I was to be paid the IR approved rates of 40ppm for the first 10,000 miles and 25ppm thereafter, would I (and or the company) incur a tax penalty?

I do hope that you can help me to resolve this issue. Thank you.
Steve Murray

[mullet]

This is the third time that you have asked essentially the same question. Here are the same answers:

1. A "car allowance" is a bit of a misnomer. In reality it is salary, and taxed as such.
2. If you use your own car for work, your employer can pay for business travel at up to 40p/25p per mile, the reduction coming in at over 10,000 miles.
3. If your employer pays less than this then you can claim tax relief on the difference, i.e. it reduces your taxable income by that amount.
4. It is usually beneficial in terms of tax relief for an employer to pay the maximum rate, but it must always be remembered that tax relief is all very well - the cost has to be borne in the first place.

Here are the URLs of your other posts on the same topic.

http://www.taxationweb.co.uk/forum/business-mileage-t30810.html#p110794
http://www.taxationweb.co.uk/forum/private-car-mileage-allowances-t31215.html#p110798

[Steve Murray]

Thank you for your help.

I lost the original link to my original question, and only found it again after resubmitting the question last night. This particular response was sent to me via the alert and I am not going to lose this one.

This answer does clarify some other issues though, and I appreciate your help and advice.

Thank you.
Steve Murray.

[mullet]

If you want to find your own posts, go to advanced search and "search for author". But in your case it's even easier as you sign off with your name. Just put your name in the simple search box. You don't need to save links to find your posts.