Car Sharing Allowance

groovykikko

I'm a bit confused on the car sharing allowance.

There's a 5p per passenger per business mile allowance if both/all passengers are travelling for work purposes. I understand that the allowance only exists if your employer pays you it but I can't find any further information.

Does anyone know if this 5p is in addition to the 40p allowed (so your employer could pay you 45p per mile, or say if you were paid 30p per mile then they could pay you 35p per mile and you could relieve the other 10p per mile)?

Many thanks in advance.

payrollpro

Hi,

The situation with the 5p passenger allowance is a bit confusing but here we go. The employer can pay an additional 5p per mile on top of the usual rate if the driver is on company business and the passenger is doing the same journey. There is supposed to be a restriction that they must both be going to the same place but I understand HMRC are a bit more relaxed about that now.

When the payments are assessed for tax purposes at the end of the year the payment made is net of the 5p per mile and the total is then compared with the AMAP rates. If the result is positive then there is a profit to be returned and if it is negative the taxpayer has additional tax free allowance to offset.

The 5p per mile is not an absolute allowance, in other words it cannot be claimed back so it has to be discounted when the assessment is carried out.

Remember that when the comparison is made it is the total amount of money paid in respect of travelling in the tax year against the AMAP allowance for the miles travelled in the year so they are not alike. Because mileage payments tend to be a month in arrears the calculations can be a bit tricky.

Also remember that if the employer makes other payments, like contributions to insurance or some other lump sum payment it has to be included in the calculation when you compare with the AMAP figures.

Payrollpro

groovykikko

Thanks, that helps a lot!