Understanding the approved mileage allowance payments rules

The tax and National Insurance rules on mileage allowance payments have not changed for a considerable number of years but despite this I still see a lot of confusion over what is permitted.

There are specific tax rules for employees who undertake business mileage in a company-owned vehicle and for those who are required to travel in their own vehicle.

The tax rules in respect of a company vehicle trigger a fuel scale charge (see ITEPA 2003 s 149) unless the cost of any private fuel is specifically made good by the employee. An employee can simply be reimbursed the cost of fuel incurred on business mileage in which case HMRC permits the employer to reimburse a rate per mile using the advisory fuel rates which the department publishes every three months.

There are some current disputes concerning National Insurance and these are waiting to...