ACFO has repeated its call for Government officials to complete a robust analysis, including financial modelling, of the Approved Mileage Allowance Payments (AMAP) system as part of a comprehensive review.
The system sets the structure and rates which can be paid tax-free to employees who drive their own cars on company business.
ACFO first called for a shake-up in AMAP rates eight years ago and repeated its request during a recent face-to-face meeting with officials from HM Treasury and HM Revenue and Customs (HMRC).
The renewed call comes at a time when HMRC is considering the figure that should be set for the tax-free mileage rate for privately-owned electric cars that are driven on business trips.
It also comes in the wake of ACFO’s success earlier this year to have Advisory Fuel Rates reviewed quarterly instead of half-yearly by HMRC, which also agreed to change the mechanism used for calculating rates. It was a fight won after a five-year campaign.
The AMAP rate for employees who use their own cars or vans for business mileage increased to 45p from 40p for the first 10,000 miles driven on April 6 this year. The rate for mileage beyond 10,000 miles remained unchanged at 25p per mile.
It was the first rate change since the system was introduced in 2002, although a lower 4000-mile threshold was in place until that date.
When the 40p/10,000-mile regime was launched average pump prices were 75.8p a litre (unleaded petrol) and 77.3p a litre (diesel). They have since climbed to an average of 133.7 for a litre of unleaded petrol and 140.95p for a litre of diesel, according to the AA.
ACFO has consistently argued that the current 45p (and previous 40p) per mile reimbursement for the first 10,000 miles and 25p a mile thereafter is over-generous for higher-mileage cases, and actually works against the Government’s environmental approach to discourage unnecessary mileage.
The generosity has also helped to fuel the decision by some employees to opt out of company car schemes over the years.
ACFO seeks, as a specific objective, a review of the AMAP system that is less ‘broad brush’ and significantly more refined than the current one with its single mileage threshold and two reimbursement rates.
That change could, for example, see the introduction of a number of mileage breakpoints starting from as low as 2000 or 4000 miles. An initial higher reimbursement rate than the current one would then be set with rates reducing on a sliding scale linked to increasing mileage thresholds.
ACFO Chairman Julie Jenner said: “The current AMAP structure was established almost a decade ago and since then the only change has been the 5p a mile increase in reimbursement rate to 45p.
“ACFO has always held the view that the 10,000 mile threshold provides a significant incentive for many employees to drive completely unnecessary distances, because they can generate significant expense claims tax-free. That is even more likely to be the case given today’s economic climate with personal and household budgets being squeezed.
“We would like Government officials to carry out a robust computer modelling exercise that delivers a more subtle approach to mileage reimbursement instead of the current two-band, single mileage threshold system.
“Feedback from the ACFO membership clearly indicates that the ‘broad brush’ approach taken by Government is not working. We therefore took the opportunity at our meeting to request that an analysis is undertaken and we will continue to put forward the case for consistent and fairer treatment of AMAP rates.
“We enjoy an excellent working relationship with HMRC and Treasury and we are optimistic following the meeting that their financial experts will address our views.”
For more information: www.acfo.org