Unfortunately not. If an employer wants to reimburse an employee for the costs of using their own car, then only the Approved Mileage Allowance Payments (AMAPS) can be used. This is because:
- the legislation does not permit the payment of actual costs,
- nor does it permit any agreement to be reached with HMRC (a “bespoke agreement”) to pay anything other than the AMAPs.
- AMAPs can be paid tax free at 45p for the first 10,000 business miles and at 25p thereafter
- Class 1 NIC will be due on any payment over 45p per mile – there is 10,000-mile rule here.
Any payments above the AMAP’s rate will be reported on P11d for income tax purposes unless you are payrolling your benefits under RTI. Any payments exceed the AMAP NIC limit will give rise to Class 1 NIC liabilities via RTI.
If you are paying your employees below the maximum AMAP limits, they can claim income tax relief under the mileage allowance relief rules.
Different rules of course apply to travel expenses paid for users of company cars.
Source material and guidance
The income tax legislation on AMAPs is covered by s229 to s236 ITEPA 2003. HMRC’s guidance is at EIM31200 which explains the rules and provides some examples.
As mentioned, there is no other form of permitted tax-free payments for employees using their own car. This is because s337 ITEPA 2003 (Travel Expenses) refers to s359 ITEPA 2003 which disallows any claims for such travel expenses where either AMAPs are received under s229, or Mileage Allowance Relief could be claimed under s231 by the employee. Therefore, no actual cost calculations will be permitted nor is any bespoke agreement (dispensation) permissible.
A ministerial statement on 5th September 2022 made it clear that any amount paid above AMAP will be chargeable to PAYE and NIC. See:
https://questions-statements.parliament.uk/written-statements/detail/2022-09-05/hcws280
The NIC legislation is Reg 22A SI 2001/1004 and HMRC’s guidance is at NIM05803. The legislation states that anything which is not an AMAP is earnings for Class 1 NIC purposes. HMRC confirms that there is only one threshold for NIC i.e. the higher rate for the first 10,000 miles. Therefore, up to 45p per mile could be paid for say 20,000 business miles but the excess over the tax thresholds would be chargeable to income tax, but not NIC.
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