Tax-friendly authorised mileage payment allowances have affected company car uptake, so will the government clamp down on lost revenue, asks Nick Golding
If you read nothing else, read this …
- Authorised mileage allowance payments (Amaps) permit employers to reimburse personal car drivers for business miles tax free at 40p for the first 10,000 miles each year, and 25p per mile thereafter.
- There may be changes ahead for Amap rates as the tax advantages offered to drivers in employee car ownership plans (Ecops) is causing a migration from company cars and resulting in a loss of revenue for the government.
- Some providers believe that the government may increase the amount of Amap tax savings that can be made on greener vehicles such as LPG cars.
HM Revenue & Customs is in the midst of a review of authorised mileage allowance payments (Amaps) which are paid tax free by employers to workers who drive business miles in personal vehicles. Under existing tax rules, employers are able to pay drivers who use their own cars, including those in the popular employee car ownership plans (Ecops), at a rate of 40p for the first 10,000 miles and then 25p for each mile thereafter, tax free.
The government is believed to be concerned that the tax-friendly nature of Amaps is driving employees away from heavily-taxed company-owned cars towards Ecops, therefore depriving it of a valued source of revenue.
Richard Schooling, commercial director at Alphabet, explains: “Joe Bloggs is currently driving a company car, so he has to pay company car tax, which, if taken away, is a potential source of revenue that the employer could use to fund an employee’s personal vehicle.”
While providers cannot see Amaps being removed altogether, they predict that the reimbursement rate may well be cut in a bid to stem the migration to Ecops from company cars.
“I don’t think that Amaps will be abolished, but there is a good chance the government will reduce the value of the rates,” explains Schooling.
Another factor influencing Amap rates is the government’s pro-green agenda on fleet, which was re-confirmed in the Chancellor’s pre-budget speech in December last year.
Mike Lancey, technical business manager at Lloyds TSB Autolease, explains: “Green vehicles don’t fit into Ecops. They are expensive and ordinary, so it may be that Amap figures in the future on hybrid cars are moved to 60p per mile instead of 40p.”
However, others believe that such a move is unnecessary, because Ecop drivers tend to drive just as new and fuel-efficient vehicles as company car drivers.
“In our experience, a large population of Ecop drivers are driving pretty much the same, if not less, [CO2] emitting cars than company car drivers, so it’s not true,” says Schooling.
Leisure firm Whitbread only runs a company car scheme for staff. Although it has looked at moving to an Ecop for tax reasons and the Amap advantages, it believes that the control it currently has over providing safe and green vehicles for employees through company cars is an overriding reason to stick with its existing scheme.
Nigel Trotman, relationship manager at Whitbread, says: “We have done an awful lot to ensure that the cars we provide are as low as possible on harmful emissions and we replace them regularly.”
So while the exact fate of Amaps is unclear, there is a certain level of industry confidence that they will remain in place. However, a more sophisticated level of rates that keeps people in company cars and ushers Ecop drivers into greener cars is highly likely.
The industry is awaiting the outcome of HMRC’s consultation on Amaps and expects some announcement to be made in the forthcoming budget, if not before.