The fixed mileage rates of 45p per mile and 25p per mile are designed to cover the costs of fuel and wear and tear of an employee's car when used for business trips ...
If an employee has a company-supplied vehicle, they cannot use these rates, but instead make a mileage claim that only covers the cost of fuel, providing they are paying for it!
HMRC say a mileage log must be kept with information that includes the date and purpose of the trip, the distance travelled and the start/end address of each trip, which should include postcodes. Mileage cannot be claimed for commuting between home and work.
These mileage rates have remained the same for over 10 years. However, fuel and running costs for vehicles have increased significantly, especially in recent months. If you're thinking of paying more than the 45p per mile and 25p per mile rates, then your employee will find any excess will be treated as taxable income and must be reported on a P11D.
However, HMRC has said that if the cost of business travel is higher than the fixed rates, you can use your own rates, though you must be prepared to keep full and detailed records, with appropriate calculations as proof.
It's a difficult decision for employers when employees come to you with this issue. If you put the work in then you can pay higher rates, but your employee will be taxed on anything additional you pay them.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.