COMPANY CARS
CIPD criticises HMRC proposal on mileage reimbursement
Proposals by the HM Revenue and Customs (HRMC) to link approved mileage allowance payments to CO2 emissions may leave many businesses facing increased costs and administration but do little to help the environment. This is the view of the Chartered Institute of Personnel and Development in response to recent proposals from the HMRC.
Approved mileage allowance payments (AMAPs) are designed to reimburse drivers travelling on company business in their own cars and are currently set at 25 pence per mile (ppm) for the first 10,000 miles of business travel and 40ppm thereafter. Under new proposals, future rates look likely to be linked to a car’s CO2 emission level and the number of business miles covered.
Full details of the recent consultation are available on the HMRC web site at www.hmrc.gov.uk/cars.
Proposals will cause more administration and costs
While the CIPD accepts that moves to improve the environment should be welcomed, it says that the proposal to link AMAPs to CO2 will not be an effective way of achieving this. Instead, the CIPD believes the actual effect will be to place more administration and costs on to many small- and medium-sized employers.
At the moment, the current system, with only two rates of reimbursement, is effective and relatively easy to administer. In contrast, the CIPD believes that using potentially different rates for every car used on business could make things very difficult for those calculating what needs to be reimbursed. Such a situation, it says, may lead to firms requiring complex computer software that would have to be updated every year.
In addition, further complications would arise because companies would continually have to chase up CO2 emission levels of new and occasional drivers, and those changing their vehicles part way through the year.
Presently, most companies do not routinely keep a record of the individual’s car type and CO2 emission, while there is a danger that some individuals may be tempted to claim the highest mileage reimbursement rate and employers would not be able to easily check whether they are entitled to do so.
Adverse effect on drivers too
The CIPD also believes that the changes could have an adverse effect on drivers too. An illustrative calculation from the HMRC, for example, shows a top reimbursement rate of just 25ppm for high-CO2 vehicles. With such a low rate the CIPD fears that some individuals, especially lower graded staff, may be reluctant to use their own cars for business journeys. If this happens, employers could be forced to use hire cars further adding to costs and leaving CO2 emissions in the hands of hire car providers.
A final word
“If HMRC wishes to encourage the driving of lower-CO2-emission-vehicles, then this could be better achieved through other initiatives, such as differentiating bands of vehicle excise duty.” - Charles Cotton, CIPD pay and benefits adviser.
Want to know more?
The Chartered Institute of Personnel and Development (CIPD) has over 127,500 members and is the "leading professional institute for those involved in the management and development of people". Find out more at www.cipd.co.uk.