Motoring Expenses

Introduction

Motoring expenses cover the costs employees incur when using a vehicle for business purposes. The rules differ depending on whether the vehicle is personally owned or company-owned.

Using an Employee’s Own Car

Employees using their own vehicle for business travel can claim Mileage Allowance Payments (MAPs). These payments cover fuel, wear and tear, insurance, and maintenance.

Mileage Rates

• • • First 10,000 miles per tax year: 45p per mile

    • Over 10,000 miles per tax year: 25p per mile

    • Motorcycles: 24p per mile

    • Bicycles: 20p per mile

    • Passenger payments: 5p per mile (for carrying fellow employees on business journeys)

Important Notes

• • • Employees cannot claim separately for fuel, insurance, or repairs—the mileage rate covers all costs.

    • If an employer pays less than the approved rate, employees can claim Mileage Allowance Relief (MAR) from HMRC.

Using a Company-Owned Vehicle

Employees driving a company-owned vehicle can claim actual fuel costs for business travel.

When a Company Can Claim Actual Fuel Expenses

A company can claim actual fuel costs in specific scenarios:

1. Company-Owned Vehicles Used for Business

   • If an employee drives a company-owned vehicle for work-related travel, the company can reimburse actual fuel costs tax-free.

   • The employee must keep records of fuel expenses and business mileage to ensure compliance.

   • HMRC’s Advisory Fuel Rates (AFRs) can be used to calculate reimbursement without triggering tax liabilities.

2. Pool Cars

   • A pool car is a company vehicle shared by multiple employees and used only for business travel.

   • Since pool cars cannot be used for personal journeys, all fuel costs are fully deductible.

3. Commercial Vehicles (Vans, Lorries, etc.)

   • If a company owns vans, lorries, or other commercial vehicles, fuel costs are fully deductible, provided the vehicle is used solely for business.

   • If an employee uses a company van for personal travel, it may trigger a Benefit-in-Kind (BIK) tax charge.

4. Business Travel in a Company Car

   • If an employee uses a company car for business trips, they can claim actual fuel costs.

   • If the employer provides free fuel for personal use, it becomes a taxable benefit.

5. Leased Vehicles

   • If a company leases a vehicle, it can claim fuel costs for business use.

   • However, if the vehicle is used for personal travel, the company must adjust claims accordingly.

Fuel Reimbursement

• • • Employees must keep records of fuel expenses.

    • Employers can reimburse fuel costs tax-free, provided they are for business use only.

    • If an employer provides free fuel for personal use, it is considered a taxable benefit.

Advisory Fuel Rates (AFRs)

HMRC sets Advisory Fuel Rates for company cars, which vary based on engine size and fuel type. Employers can use these rates to reimburse fuel costs without triggering tax liabilities.

Other Relevant Considerations

Company Car Tax

Employees using a company car for personal use may be subject to Benefit-in-Kind (BIK) tax, calculated based on:

• • • CO₂ emissions

    • List price of the vehicle

    • Fuel type

Parking, Tolls, and Congestion Charges

Employees can claim reimbursement for:

• • • Parking fees (business-related only)

    • Toll charges

    • Congestion charges (if incurred for business travel)

Leased Vehicles

If an employee leases a vehicle personally, they cannot claim lease payments as a business expense. However, if the employer leases the vehicle, costs may be deductible.

Examples of Motoring Expense Claims

Example 1: Employee Using Their Own Car

An employee drives 200 miles for a business trip. They can claim:

• • • 200 miles × 45p per mile = £90 reimbursement

    • No separate claims for fuel, insurance, or maintenance.

    • No claim for actual fuel based on receipts.

Example 2: Company Car Fuel Claim

An employee drives a company-owned vehicle for business purposes. They can claim:

• • • Actual fuel costs based on receipts.

    • Advisory Fuel Rates if reimbursed by the employer.

Example 3: Parking & Toll Charges

An employee attends a client meeting and pays:

• • • £10 parking fee

    • £5 toll charge Both expenses are reimbursable.

Example 4: Personal Use of Company Car

An employee uses a company car for personal trips. Since this is not business-related, they must pay tax on the Benefit-in-Kind (BIK) value.

Common Mistakes to Avoid

Mistake 1: Claiming Fuel Separately for Personal Cars

Employees cannot claim fuel costs separately when using their own car—the mileage rate already covers fuel.

Mistake 2: Misusing Company Fuel Cards

Using a company fuel card for personal trips creates a taxable benefit.

Mistake 3: Incorrectly Claiming Parking & Tolls

Only business-related parking and toll charges are reimbursable—personal expenses are not.

Mistake 4: Not Keeping Proper Records

Employees must keep receipts for fuel, parking, and toll claims to ensure compliance.