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The Inland Revenue publish a table of Authorised Mileage Rates which is used as the basis of the Fixed Profit Car Scheme.  From April 2002 this is also referred to as the Approved Mileage Allowance Payment (AMAP). 

The rates have been increased for smaller engined cars for the year ended 5 April 2002, and commencing from 6 April 2002 there is a single rate for all engine sizes at 40p per mile on the first 10,000 miles in a tax year and thereafter 25p on each additional mile.

There are more details at http://www.inlandrevenue.gov.uk/rates/mileage.htm and http://www.inlandrevenue.gov.uk/pdfs/ir125.htm.

Employees (including Directors) who provide their own cars for business use will wish to claim a mileage allowance from their employers.  If employers pay a mileage rate which exceeds cost, the profit element is taxable.

Unless the employer has an expenses dispensation, then the full amount of the mileage allowance must be reported on form P11d and the employee must claim relief for business mileage.

Until 6 April 2002, an employee could calculate and claim their true costs, but the Inland Revenue would also accept the rates which they issue each year as the Revenue Authorised Mileage Rates.

Rates for the tax year ended 5 April 2002 were as follows (rates for the years ended 5 April 1998, 1999, 2000 and 2001 did not change and are brackets) -

An employer can chose to pay mileage allowances without reference to engine size in which case the rates are 42.5p (40p) per mile up to 4,000 miles and 25p (22.5p) per mile thereafter.

An employee who is required to use his own car for business and who is paid less than these rates may claim  tax relief on the shortfall.

Interest paid on a loan taken out for the purchase of a car may also qualify for relief and is not included in the RAMR.

The employee must keep records to identify business from private mileage.

Motorcycles have an equivalent scheme for 2000/01 and 2001/02 at 24p per mile and the rate of allowance for pedal cycles is 12p per mile.

There are interesting figures about the real costs of running petrol and diesel cars, and motorbikes, on the AA website.

See also -
Additional Passenger Rate - a new tax free payment from 6 April 2002.
Mileage Rates (Fuel Only) - new advisory figures for 2002.
Mileage Record - print this handy form to record your business mileage
VAT in Mileage Allowances  - can be reclaimed by some VAT registered businesses.
Business Cars - the rules on tax relief
Car Fuel Benefit - changes from 5 April 2003.
Car Policy - is a company or firms car and fuel worthwhile?
Travel and Subsistence - new rules on commuting since 6 April 1998 - are you complying?

Reminder - disclaimer applies. Please feedback your comments.   This page was last modified 18 May 2003.