Salary Sacrifice and mileage rates

[atuk]

Hi all,

I'd like to ask for some information please. My employer is paying me a car allowance which I am using for a Model Y via a salary sacrifice scheme. Where I am unsure about are the mileage rates.

As far as I know, car allowance is classed in the same way as normal salary, regardless of what type of vehicle I buy - hence the mileage rate is 45p (25p over 10k miles). But then there is the salary sacrifice scheme, which effectively I pay through my salary.

So from what I understand, I should be eligible to claim 45p (25p over 10k miles) for business miles ... can someone comment on this please?

Thanks

 

[spooksman]

I think you'll find this has been discussed on here a fair amount - that is just a reflection on how confusing this can be!

The first point to highlight is your company can actually pay you whatever they want for your mileage, it is just that there could be tax implications for you depending on what they pay - so a majority of businesses stick to the published HMRC rates to keep things simple.

The tax implications are different based on whether it is a company car or a private car - as a company car Advisory Fuel Rates (AFR) apply, as a private car Approved Mileage Allowance Payments (AMAP) rates apply - these are quite different.

If you have got your car via a Salary Sacrifice scheme, I would expect that you actually have a company car - you have given up part of your salary in return for a benefit - this means that your car will be reported on a P11D or as a payrolled benefit, and your tax code will have been adjusted based on the 'cash equivalent' of the vehicle - that is another discussion I guess .

If this is the case, then the amount you can be paid before incurring tax will be based on the published Advisory Fuel Rates (AFR)- these rates are much lower than the 45p/25p AMAP rates that you detailed in your post. Right now, the AFR rates for Electric cars is terrible at 5p per mile. This should obviously have been adjusted some time ago, and they may change this when the new rates are announced that apply from December 1st - however, I'm not over confident.

The summary of that is that if your company pays you more than 5p per mile for business travel, you'd be taxed at your current rate for the extra money above the 5p if it is a company car

As an individual you can make representations to the HMRC to avoid the tax charge by keeping detailed records of business mileage you undertake and what you have spent to cover those. This is an interesting area when you consider some of your changing may be completed at home...

 

[atuk]

That's a great reply, thank you.

You are right, I have read many posts about this and in all honesty, confusion still remained.

Your answer makes sense and aligns with my thoughts. I guess I have a quick chat with payroll to see how they plan to do it (delivery in few weeks). Based on that it's the AMAP or AFR that apply.

 

[spooksman]

I think you'll find this has been discussed on here a fair amount - that is just a reflection on how confusing this can be!

The first point to highlight is your company can actually pay you whatever they want for your mileage, it is just that there could be tax implications for you depending on what they pay - so a majority of businesses stick to the published HMRC rates to keep things simple.

The tax implications are different based on whether it is a company car or a private car - as a company car Advisory Fuel Rates (AFR) apply, as a private car Approved Mileage Allowance Payments (AMAP) rates apply - these are quite different.

If you have got your car via a Salary Sacrifice scheme, I would expect that you actually have a company car - you have given up part of your salary in return for a benefit - this means that your car will be reported on a P11D or as a payrolled benefit, and your tax code will have been adjusted based on the 'cash equivalent' of the vehicle - that is another discussion I guess .

If this is the case, then the amount you can be paid before incurring tax will be based on the published Advisory Fuel Rates (AFR)- these rates are much lower than the 45p/25p AMAP rates that you detailed in your post. Right now, the AFR rates for Electric cars is terrible at 5p per mile. This should obviously have been adjusted some time ago, and they may change this when the new rates are announced that apply from December 1st - however, I'm not over confident.

The summary of that is that if your company pays you more than 5p per mile for business travel, you'd be taxed at your current rate for the extra money above the 5p if it is a company car

As an individual you can make representations to the HMRC to avoid the tax charge by keeping detailed records of business mileage you undertake and what you have spent to cover those. This is an interesting area when you consider some of your changing may be completed at home...

Quick update on this, I see the Advisory Fuel Rate for electric cars is up to 8p from December 01 2022.

 

[atuk]

That is very helpful, and getting closer to realistic rates.

Quick example here:

On 8p per mile, a 100 mile business journey would work out £8 claimable from the employer. A simple assumption of 4 miles / kwh would use 25kwh for this journey. The electricity break even point is therefore £0.32 / kwh ... if I can charge for a lower rate, I'd be quids in ... anything above that (public rapids, SuC, etc) I'd be at a loss.

Does anyone know if I can alternatively claim actual charging cost for business travel if I keep a mileage record? For example, my charging cost is £100 per month and I did 65% of my miles for business purposes, could I claim £65?

 

[spooksman]

There's a while lot in there...

Firstly, the amount of money you get will be decided by your employer, if they pay you under AFR, you can make a claim to HMRC for the taxable loss, if they pay more, then they'll report that to HMRC on a P11D (most likely), and you'll pay tax on the excess.

I guess stage one is what your employer has agreed to pay, as if they won't pay more than AFR then you haven't got far to go, as HMRC aren't interested in covering your mileage, they just care about the extra money you've been given.

If your company will pay you more than AFR then you can you move onto stage two, which is making a personal representation to HMRC for why you shouldn't be paying tax on the excess.

Remembering that AFR payments are designed to just cover the costs of motoring in a company car (so basically fuel, except HMRC don't technically see electricity as fuel!), then you would have to provide detailed records of the business trips and the charging as evidence. (AMAP rates are designed to cover other costs too, like wear and tear, that is not the same with AFR).

However, you should probably be careful if you decide on doing this, as you must be able to provide such evidence to HMRC that you are paying the actual cost of the energy and no more - on a bad day you might even end up with an inspection from the taxman...

That was probably a long way of saying that no, I don't think HMRC would accept your example, but I don't work for HMRC .

This is very similar to traditional ICE cars and AFR - it generally covers average costs, but if you only filled up at motorway service stations then you'd lose out. So this isn't new territory for electric cars, and there is plenty of information out there.

Good luck!