QUESTION

Reimbursement for business use of a private car

I drive my personal vehicle on company business. I get reimbursed 40p per mile. Who is responsible for insuring and paying for my vehicle for business use mileage?

Linda Falvey, sales rep

ANSWER  

The 40p your company pays you for business mileage in your personal car is called the Approved Mileage Allowance Payment – or AMAP for short. This is a tax-free amount to cover the depreciation, wear and tear, road tax and car insurance for business use. In other words, it is designed to cover more than just your fuel bill. So you remain responsible for servicing your car and insuring it.

The amount you get paid under AMAP – 40p for the first 10,000 miles; 25p thereafter – has not altered since 2002. Since then, of course, the cost of fuel has risen steadily, eroding the value of the payment.

To get the most benefit from the AMAP payment it is advisable to run the most fuel-efficient private car you can. So if your car is due for change, you should think about that.

Another alternative, which you might want to suggest to your company, is they use a daily rental car for your business mileage. That way you don’t end up out of pocket with AMAP payments that may not cover the full cost of running your car; and your company is putting you in a vehicle that is insured for business use, while fully complying with all health and safety issues.

Editor’s note: There is further detail on AMAP payments in our Law & Tax section. Go to Tax: approved business mileage rates (AMAPs) where you will also find a link to one of our Knowledge Bank factsheets on AMAPs.