The quarterly update of HMRC’s advisory mileage rates has just been published. These relate to the amount reclaimable by individuals driving business mileage in company cars who do not receive car fuel as a benefit, or indeed repayable by individuals who do receive car fuel as a benefit in respect of their private mileage. They are not to be confused with what were known as the Fixed Profit Car Scheme rates, relating to business mileage driven in an employee’s own car, which are as follows:
First 10,000 business miles per tax year 45p per mile
Additional business miles 25p per mile
The dramatic uplift in car fuel benefit charges over the years has made this a benefit of limited value to most company car drivers, and general advice to such drivers is to pay for their own business fuel and reclaim it using the advisory rates. However, there is an oddity in the car fuel benefit regime which to my mind makes it a nonsense, and as such ripe for reform.
Many years ago, it used to matter significantly for tax purposes how many business miles you drove in your company car in a tax year. There were break points at 2,500 and 18,000 business miles, above which the taxable benefit reduced significantly. There was a clear logic to this, in that someone who was driving more than 18,000 business miles in a company car could legitimately argue that the car was an integral part of their job, whilst someone who was driving less than 2.500 business miles in a year was clearly being provided with the car as a pure ‘perk’.
However, under the new regime, whereby business mileage matters not at all in assessing the level of car fuel benefit, this position has been effectively reversed. The ideal recipient of a car fuel benefit is now someone who drives a small amount of business miles and a massive number of private miles, on the basis that the fuelling cost for the latter is significant. This is totally counter-intuitive, has been a feature of the tax system for many years, and urgently needs changing.
This is (admittedly an extreme example) of an aspect of the tax system that defies all logical explanation, and thus tends to bring the system into disrepute. Whilst piecemeal efforts are made to remove anachronistic aspects of the tax legislation, these are rendered fairly irrelevant when blatant eccentricities such as the impact of the fuel benefit system are tolerated. When can we expect to see politicians apply some true intellectual rigour to the UK tax system?