Mileage Reimbursements and Commuting vs Business Travel
Mileage reimbursement can be a tricky area when it comes to paying expenses. Many employees rightly wonder why their employers only reimburse them for travel expenses, over and above the distance travelled to their regular place of work.
The fact is, employers will ‘net off’ the employee’s regular commute when calculating and paying mileage expenses. This is because there is a distinction between the business part of the journey, and the private part of the journey.
When employers pay for staff private travel, there are usually tax and additional NIC liabilities to pay. For this reason it is taken out of the expenses equation. Staff will get mileage expenses on their business travel only, which can include a range of things such as train fares, taxi fares, and an agreed rate of mileage for drivers. Sometimes subsistence costs for travelling are also reimbursed, such as airport meals or coffee at the train station, as well as necessary overnight accommodation.
For business mileage that is gained in a staff member’s own car, the mileage reimbursement is set at a level that equates to, or is less than, the approved mileage payment rate set by the HMRC. The staff member doesn’t need to report this element of mileage on their P11D form, or pay any tax or NIC.
Because the private element of the commute isn’t covered by expenses, the non-refunded element of the journey can be reclaimed for tax purposes. For many people who travel widely on business, this can represent a significant sum of money indeed. In fact, for some people, mileage claims and tax refunds have reached the hundreds, if not thousands of pounds!
What counts as business travel?
It relates to two different journey types – those journeys that are part of employment duty, and those which are related to the conduct of business at a temporary location, such as another office or site.
HMRC provide a useful and detailed fact-sheet about this, but it can be a complicated area.
So what portion of travel can I claim a tax refund on?
If, at any point since April 2013, you have used your car to travel for business purposes, and been reimbursed at anything less than 45p a mile, you will very likely be eligible for a tax refund. This refund will cover all of your business mileage paid at less than 45p, less the mileage that represents your private travel, or daily commute to your usual place of work.
HMRC will not pay this back automatically: you must make an application for the refund, or you won’t get it. To find out how much you could be due, visit our handy calculator, and then apply online for help and support with the necessary paperwork and process. We make it quick and easy to make a mileage claim from HMRC.
Use our free calculator to find out how much income tax you could be entitled to reclaim.Calculate Tax Rebate