Tax Update - Approved mileage allowance payments

The long running saga of Revenue & Customs' review of employee car ownership schemes (ECOS) and the interaction with company car tax and mileage payments carries on. This year's Budget noted that the government was considering the case for changing the structure of approved mileage allowance payments (AMAPs) to align the tax and national insurance contributions treatment.

There was also a mention of how this would be a 'green' linked policy to help the environment.

The Revenue has now announced that it is looking at possible ways that the current structure of AMAPs might be changed. Options include whether:

•    the rates and threshold can be adjusted to better reflect differing costs of drivers using their own cars for business;

•    the structure can be changed to encourage drivers to be more environmentally aware; and

•    the tax and NICs rules can be aligned for mileage payments.

Comments are being sought from employers on the rates and thresholds that could be used but the Revenue has emphasised that the examples it has provided are merely illustrative of the approach at this stage. It would also like views on the administrative burden that may arise from any changes.

One of the possibilities would combine both a carbon dioxide emission-based approach with a change to both rates and thresholds, the aim being to provide an environmental incentive, while recognising the higher initial costs.

This may look something like this:

•    55p per mile for cars within the 15% band or lower up to 5,000 miles;

•    40p per mile for cars within 16%-25% band up to 5,000 miles;

•    25p per mile for cars over the 25% band, cars with no carbon dioxide emissions and all cars over 5,000 miles.

The Tax Faculty of the ICAEW will be submitting a response by the deadline of 31 July 2007 and comments for inclusion should be sent to

peter.bickley@icaew.com.
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