Approved Mileage Allowance Payments - Consultation on proposals to set rates that provide environmental incentives

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As part of HMRC's continuing review of Employee Car Ownership schemes (ECOS) and the interaction with company car tax (CCT) and mileage payments, HMRC is inviting interested parties to comment on three possible approaches that would

• encourage drivers to be more environmentally aware
  
  
• set rates and thresholds that reflect more effectively the different costs that drivers incur when using their own cars for business
  
  
• align the tax and NICs rules for mileage payments.

The rates and thresholds for approved mileage allowance payments (AMAPs) used in the three proposed scenarios are illustrative only. Comments on the rates and thresholds are welcomed but HMRC is particularly interested in views on the administrative burdens that may arise from such changes.

1. Linking AMAPs to CO2 emissions

The aim of this scenario is to explore how AMAPs could be tied to more environmental incentives to reduce CO2 emissions. Given the interaction between company cars, ECOS and mileage payments highlighted by the review so far, a possible approach would be to link the AMAP limits to the CCT lower threshold. One example of how this could work would be:

• 50p per mile for cars within the 15% company car tax band or lower (currently 135g/km) up to 10,000 mile threshold
  
  
• 40p per mile for cars within 16% - 25% band (currently 140-185g/km) up to 10,000 mile threshold
  
  
• 25p per mile for cars over the 25% band; all cars with no CO2 emissions and all cars over 10,000 miles.

2. Amending the rates and thresholds

Another option is to amend the rates and thresholds so that they relate more closely to the differing needs and costs of drivers using their own cars for business mileage and reflect, in particular, the high initial costs of drivers using their own car for business purposes. For example:

• 50p per mile for 1,000 miles
• 40p per mile for the next 5,000 miles
• 25p per mile thereafter.

Another example:

• 50p per mile for 2,000 miles
• 40p per mile for the next 4,000 miles
• 20p per mile thereafter.

3. Combining these two approaches

A further possibility would be to combine both a CO2 emission based approach with a change to both rates and thresholds, the aim being to provide an environmental incentive, whilst recognising the higher initial costs. For example:

• 55p per mile for cars within the 15% band or lower up to 5,000 miles
  
  
• 40p per mile for cars within 16%-25% band up to 5,000 miles
  
  
• 25p per mile for cars over the 25% band; cars with no CO2 emissions and all cars over 5,000 miles.

Comments on these ideas are sought from all representatives from industry and business with an interest in company cars, employee car ownership schemes and mileage allowances. They should be sent to pa.harris@hmrc.gsi.gov.uk by 31 July 2007.

...UK Payroll News - Latest

Sources:
Further Discussions On Approved Mileage Allowance Payments

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