A ten mile distinction on business claims

The latest update to HM Revenue & Customs' (HMRC's) advisory fuel rates sees 1p reductions to several petrol and LPG rates.

Engine size	Petrol	Diesel	LPG
1400cc or less	11p	9p	7p
1401cc to 1600cc	13p	9p	9p
1601cc to 2000cc	13p	11p	9p
Over 2000cc	20p	13p	13p

These rates can be used where an employee is reimbursed for business mileage driven in their company car, and will be reviewed again on 1 March 2016.

When employees use their own car for business mileage, a rate of 45p a mile can be paid for the first 10,000 business miles driven each tax year, with 25p a mile thereafter. Reimbursement up to these amounts is tax free, and, if the amount is not reimbursed, the employee can claim a tax deduction.

The big question, of course, is which journeys count as business mileage? The current rules are complex, especially when an employee travels from home to a location near to their normal workplace. A basic rule is that if a journey is essentially the same as the employee's normal commute, then it does not count as business mileage.

HMRC normally applies a ten mile rule, and it is increasingly reinforcing this when checking on mileage claims. For example, an employee's normal commute to her employer's office is 20 miles. One day, she drives past the office to meet a client based a further 12 miles away. Although the total of 32 miles includes the normal commute, the entire journey qualifies as business mileage. The ten mile rule is, however, not relevant where an employee needs to travel in a completely different direction to their normal commute.

If the visit occurs on the way to the normal workplace, then the classification of the journey comes down to whether or not it is substantially the same as the normal commute. For example, where a client's premises are situated three miles along a four and half mile commute, then the trip to the client will not count as business mileage because the journey is not substantially different to the normal commute. Conversely, the trip will qualify if the client's premises are three miles along an 18 mile commute. Regardless of the treatment of the initial journey, any distance between a client's premises and the employer's premises will always be business mileage.

In this edition

This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice as at 5 January 2016.