A. The appropriate mileage amount for a car is 45p for the first 10,000 miles and 25p for additional miles under s94F(2) ITTOIA 2005. The mileage rate is designed the cover all running costs such as fuel, oil, insurance, road tax, MOT, servicing and repairs. The mileage amount also covers the cost of buying the car and, accordingly, it is not available where capital allowances have been claimed at any time by virtue of s94E(2) ITTOIA 2005. The HMRC Business Income Manual at BIM75005 confirms that the mileage rate does not include incidental expenses incurred in connection with a particular journey. Such costs include tolls, congestion charges and parking fees which are allowable as a deduction against profits where they are incurred solely for business purposes.
The mileage rate is only available for qualifying journeys, or any part or proportion of a journey, that are wholly and exclusively for business purposes. It is not available for private journeys including travel between home and work. A contemporaneous record of business mileage must be maintained to support any claim for the flat rate mileage rate.
The rules for the deductions allowable at a fixed rate are to be found in Part 2, Chapter 5A ITTOIA 2005 (s94B – s94G ITTOIA 2005 in relation to fixed mileage rate deductions) and this is the part of the act dealing with trades, professions and vocations. In s272 ITTOIA 2005 the framework for the application of the trading income rules in computing profits of a property business is set out. Significantly s272(2) ITTOIA 2005 omits s94D ITTOIA 2005 so the simplified expenses fixed mileage rate is not available for a property business. The HMRC Property Income Manual at PIM1103 and PIM1104 supports this where reference is made to the use of the trading income rules noting which rules apply and which rules do not apply.
However, under the wholly and exclusively rule (PIM2010) travelling expenses can be offset against income as noted in PIM2210 where they relate wholly and exclusively to the property business. This allows a deduction for the use of a vehicle but the full cost method should be used whereby all costs and expenses are included and then apportioned between business and private use to only allow the business element incurred for the purposes of the business. This approach is time-consuming.
Where the business mileage is low some property businesses have used the fixed mileage method as an approximation of the actual costs and made a full disclosure in the White Space of the tax return. This is open to challenge by HMRC who could insist on the correct method being used but where the amounts are small HMRC may not initiate an enquiry and insist upon the correct approach being adopted. There used to be an HMRC concession allowing the fixed rate deduction for mileage but this was withdrawn in 2013. Nevertheless, some property businesses continued to use the method with a full disclosure being made to HMRC as indicated above.
The recently announced Autumn Budget 2017 changes propose that the fixed mileage rates can be applied by property businesses from 6 April 17. The amendment to the rules is subject to being enacted in law. The rule changes will give scope for the simplification of the affairs of property businesses.
The HMRC Policy paper Income Tax: mileage rates for unincorporated property businesses published 22 November 2017 announced that the measures will come into effect from 6 April 2017. The HM Treasury Policy paper Autumn Budget 2017: the overview of tax legislation and rates (OOTLAR) published on the same date at section 1.3 confirms that the Finance Bill 2017-18 will give unincorporated businesses the option to use a fixed rate deduction for business mileage from 6 April 2017.
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