Claiming Mileage Costs From Employers.
Discussion
Mrs F has a part-time job with a fledgling company. All legitimate, PAYE and the like is taken care of, she's an employee and not self employed. The owners of the business are really nice people if a little un-focussed in certain areas so I don't see this as being a case of them avoiding their liablities, more one of them just not thinking about it.
And here's the problem. Her duties include attending auditions, rehearsals and shows at a number of venues which is racking up the miles. While I fully appreciate that commuting costs should be hers the cost of trekking around these places is eating into what is, frankly, pin money. In the short term it wouldn't be a problem but as the business grows her job is likely to become full-time so I think it's best to set about establishing ground rules early on. Her contract, by the way, doesn't cover this.
In the event that they were to pay her mileage am I right in thinking that it would eventually be offset against their tax liabilities, effectively not leaving them out of pocket?
And here's the problem. Her duties include attending auditions, rehearsals and shows at a number of venues which is racking up the miles. While I fully appreciate that commuting costs should be hers the cost of trekking around these places is eating into what is, frankly, pin money. In the short term it wouldn't be a problem but as the business grows her job is likely to become full-time so I think it's best to set about establishing ground rules early on. Her contract, by the way, doesn't cover this.
In the event that they were to pay her mileage am I right in thinking that it would eventually be offset against their tax liabilities, effectively not leaving them out of pocket?
Most employers will pay some travel and/or mileage costs to employees when the employee undertakes a journey on behalf of the employer. Those types of journeys are not classed as "commuting".
It is strange that they have not included the reimbursement of Travel Costs in the emplyment contract although, based on what you have said, this could just be an oversight.
Regarding how the payments work for tax purposes, if an employer pays mileage costs to an employee, those costs can indeed be deducted as expenses by the business. However, the business only gets tax relief on such costs, not a refund of those costs from HM Revenue and Customs.
An example -
if they paid an employee £3,200 in the year to cover mileage claims, they would have a legitimate expense in their annual accounts of £3,200. If they are a limited company and pay Corporation Tax at the curent small company rate of 21%, then the expense of £3,200 will help reduce their Corporation Tax bill by £672 (£3,200 @ 21%).
The employee would receive the £3,200 tax free - as it is a reimbursement of costs incurred by them in the carrying out of their duties as an employee.
It is strange that they have not included the reimbursement of Travel Costs in the emplyment contract although, based on what you have said, this could just be an oversight.
Regarding how the payments work for tax purposes, if an employer pays mileage costs to an employee, those costs can indeed be deducted as expenses by the business. However, the business only gets tax relief on such costs, not a refund of those costs from HM Revenue and Customs.
An example -
if they paid an employee £3,200 in the year to cover mileage claims, they would have a legitimate expense in their annual accounts of £3,200. If they are a limited company and pay Corporation Tax at the curent small company rate of 21%, then the expense of £3,200 will help reduce their Corporation Tax bill by £672 (£3,200 @ 21%).
The employee would receive the £3,200 tax free - as it is a reimbursement of costs incurred by them in the carrying out of their duties as an employee.
Edited by Eric Mc on Monday 29th November 18:58
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