Workers facing tax hike on mileage allowance

ross.pearman@rbi.co.uk

Construction workers could find themselves paying thousands of pounds in extra tax following an announcement by HM Revenue & Customs (HMRC) to undertake a consultation exercise on changes to Authorised Mileage Allowance Payments (AMAPs).

Workers could see a major hike in personal taxation of up to £1,000 if the government's proposals are accepted.

Many construction workers clock up high mileage due to the nature of site working. The current AMAP rates are 40p per mile for the first 10,000 miles and 25p thereafter.

But HMRC is now considering whether the structure of AMAP's can be changed to reflect the differing costs that drivers face when using their own car for business, an alignment of the tax/NIC treatment for mileage payment and to increase the environmental awareness of drivers.

The HMRC document proposes:

Linking mileage rates to vehicle CO2 emissions having similar CO2 bandings to the company car bandings and

Amending AMAP rates to reflect the higher initial costs of using your own car for business. For example, having a 50p rate for the first 1,000 business miles and subsequent rates of 40p for the next 5,000 miles and 25p thereafter.

Anne-Marie Robinson, a manager in KPMG's Employment Tax Group, said: "There is effectively a conflict between adequately recompensing drivers for the actual cost of their business mileage incurred, and HMRC taking an environmental stance on mileage reimbursement," she said.

"Consideration should also be given to the extra administration that would be placed on businesses if changes are made to AMAP rates. The more complex proposals appear to give scope for costly mistakes to be made and the opportunity for fraudulent claims."

The deadline for responses is 31 July.

The discussion document can be found on the HMRC website at www.hmrc.gov.uk.