Friday 8th August 2008 Blog

Mileage Expenses below 40p per Mile

Most bookkeepers will be aware of the HMRC approved mileage allowance. What you may not be aware of are the implications of mileage expenses paid below 40p per mile.
 
If your client receives less than 40p per mile from their employer (or their limited company) for using their own car on business journeys they can claim the extra back from the tax office. Many public sector employers, such as local authorities, do pay less than 40p per mile but their employees may well have to undertake long business journeys to attend compulsory training courses.

If they are in that position they need to calculate the total of the mileage expenses they received in the tax year, and the maximum due using the HMRC rates. Say they claimed for 1500 miles at 25p they will have received £375 (1500 x 25p), but using the HMRC rate of 40p they could claim a further £225 against their taxable income (1500 x 40p -£375). They can make that claim on the employment pages of their tax return. Or if they don't complete a self assessment tax return they can simply write to the tax office that issues their PAYE code with the details of their claim. To make this easier HMRC have produced a claim form P87. They can also submit claims for the last six tax years back to 2002/03.
 

Posted by: Bookcert Mentoring Team

Friday 8th August 2008

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