Misery for business motorists

Pump prices for motorists have reached an all-time high this week – up to £1.24 per litre or £5.62 per gallon for diesel - yet the government has once again failed to acknowledge that motoring costs have gone up. In the Budget earlier this month ‘official’ HMRC mileage rates or AMAPs (Approved Mileage Allowance Payments) of 40p per mile (or 25p per mile for mileage above 10,000 in the tax year) remained unchanged, despite an increase of over 40% in pump prices of fuel since they were first set in 2002.

It seems that in their ‘consultation’ exercise last year, the Treasury and HMRC (Her Majesty’s Revenue & Customs) only heard the voices of fleet lobbyists such as ACFO (Association of Car Fleet Operators) who maintained that mileage rates were too high and that most people using their own cars for business ‘were making a profit’.

As a result of HMRC’s failure to adjust mileage rates for inflation, many employees who are or were using their own cars for business purposes are struggling to make ends meet, or refusing to use their own cars. Of course, employers can pay higher rates if they wish, but employees are ‘taxed’ on the ‘profit’ they are alleged to have made on the difference.

Bob Blackman, of management consultants Emmerson Hill Associates, who keeps a careful eye on motoring costs, believes that this dogmatic belief by the Treasury and HMRC that people ‘make a profit’ out of running a car is utter nonsense. “The Treasury haven’t a clue what cars cost to run, so how they can tax people on some notional figure they have prepared on the back of a fag packet beggars belief. There is no mechanism for adjusting AMAPs or reviewing the impact of this and HMRC missed a golden opportunity to introduce a fair system. They have all buried their heads in the sand, and pretended that the motoring costs problem facing employees and employers will go away.

“Employers are having to research and find alternative ways of helping employees get around - such as providing fully-funded, cheap to run, economical cars, or paying a travel allowance not specifically connected to car travel - otherwise their employees are simply refusing to run their own cars, because they cannot afford to run them. Our analysis shows that overall motoring costs have risen by a substantial amount since 2002. With the cost of getting around by public transport now reaching 52p/mile, the 40p/mile should be adjusted to reflect the real cost of getting around, not some notional benchmark ‘profit’ figure which is totally disconnected with what cars actually cost to run”.