I think the reasoning from your company is that they are paying you (via the car allowance) for most of the costs built into the 40p per mile eg. the cost of replacing the car every three or four years. If they paid you the car allowance and the 40p rate you would be making a considerable profit.

The company car advisory rate is the amount per mile that the Revenue deem appropriate to cover the costs usually borne by company car drivers which is petrol and oil (although I had a company car for 12 years and never needed to put any oil into it). In my experience companies quite often use that rate as the one for car allowance drivers as well as the allowance is seen to provide the same benefits.

You can however claim tax relief at the 40p rate for the first 10,000 miles as described in the link in the other thread. So you would get tax relief on the £3,000 difference in your example.

Thank you Conmankiller.

I did read you article before posting my recent thread and found it very interesting.

I still dont understand why my company uses the following calculation rather than paying me 40p per mile

Say I did 10,000 miles per year divide by mpg (50 mpg) = 200 gallons

200 gallons multiply by the current price of petrol (e.g £5) = £1,000 paid to me for business miles

If we use the 40p per mile calculation

10,000 business miles x 40 p = £4,000

I would obvioulsy be better off if they paid me 40 p per mile. There is a £3,000 difference.

Where does the above calculation in red come from??

This recent thread may help explain in particular the post from "tt lady" and the links within the post.

http://www.moneysupermarket.com/community/forums/t/company-car-allowance-25425.aspx

Twee

You are absolutely right. I am so comfused. I really need someone to explain. All I know is that the calculation in red is how we claim back our milege from our employer. Is this what most companies do?

Thanks

Hi

Please could someone help me.

I have started a new job and I have been offered a car allowance of £4560 per year, which is fine.

What I am confused with is the price of business mileage rate I can claim.

We have to pay for our business fuel and the company then reimburse us using the following calculation:-

Say I did 10,000 business miles divide by mpg (50 mpg) = 200 gallons

200 gallons multiply by the current price of petrol (e.g £5) = £1,000 paid to me

I don’t think this is right. (where do they get the above calculation from? and is it taxable?)

I was under the impression that because I was using my own car (and receiving a car allowance) I could claim 40 pence per mile for the first 10,000 miles and then 25p per mile for over 10,000 miles tax-free.

Please can someone clarify what I can claim when using my own car and receiving a car allowance.

Also please could someone also clarify the difference between (company car -advisory fuel rates- which are currently 12p for a car with an engine less than 1400cc/petrol) and (approved mileage rates, which are 40 pence per mile for the first 10,000 and then 25p for the remainder).

Much appreciated if someone could help

Kind Regards

Maz