- Approved mileage allowances allow companies to reimburse employees
- But the 45 cents per mile rate hasn’t been updated since 2011
- Since 2002, a rate of 25 cents applies for everything over 16,000 kilometers
The CBI has called for the scrapping of a ‘stealth tax’ on mileage reimbursement in Wednesday’s budget after figures showed it was causing some employees to refuse to take their cars on business trips.
Approved Mileage Allowance Payments (AMAP) allows companies to reimburse approximately two million employees for using their cars or vans for business travel, without having to pay additional taxes.
But the 45 cents per mile rate — which is intended to cover both fuel and some wear and tear on vehicles — hasn’t been updated since 2011.
Since 2002, a rate of 25 cents applies for everything over 16,000 kilometers.
Since 2011, fuel prices have risen by 10 percent and vehicle maintenance by 48 percent, according to the Confederation of British Industry.
‘Stealth tax’: the approved rates for mileage reimbursements have not been updated since 2011
Now 18 percent of companies say some employees are refusing to take business trips because fares are no longer enough to cover their costs, according to a new CBI survey of 788 companies.
It would cost the Treasury just £90m – a fraction of the billions of pounds of some other tax measures – to increase rates to 60p and 33p, the business body calculates.
The CBI said, “It is an unfair stealth tax due to its outdated rates.”
All types of companies, from small to large, are affected.
Those refusing to make journeys include mechanics, area managers, van and truck drivers, warehouse staff, engineers and IT teams. If employers were to reimburse them for mileage in excess of the current AMAP rates, they would have to pay employers’ national insurance on the additional amount.
And employees would also have to pay income tax and national insurance on the amount.
Mohammad Jamai, director of economic policy at the CBI, said: ‘The Chancellor has a real opportunity to show that he stands with motorists and working people who make crucial business trips every day.
‘By raising tax-free mileage rates, he can ease the financial pressure on employees and their employers and encourage more business travel to boost productivity.
‘It is crucial that the government removes barriers to growth.’