- Approved mileage allowance payments allow companies to reimburse workers
- But the 45p per mile rate has not been updated since 2011.
- Since 2002 a 25p fee has been applied for any vehicle over 10,000 miles.
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The CBI has called for a ‘hidden tax’ on mileage to be scrapped in Wednesday’s Budget after figures suggested it was causing some employees to refuse to take their cars on business trips.
Approved Mileage Allowance Payments (AMAP) allow companies to reimburse around two million workers for using their cars or vans for business trips without incurring additional taxes.
But the 45p per mile rate, which is intended to cover fuel and some wear and tear on vehicles, has not been updated since 2011.
Since 2002 a 25p fee has been applied for any vehicle over 10,000 miles.
Since 2011, fuel prices have risen by 10 per cent and vehicle maintenance by 48 per cent, the Confederation of British Industry said.
‘Stealth tax’: Approved mileage allowance payment rates have not been updated since 2011
Now, 18 percent of companies say some employees are refusing to take business trips because fares are no longer enough to cover their costs, according to a new CBI survey of 788 companies.
It would cost the Treasury just £90m – a fraction of the multi-billion pound total for some other tax measures – to raise rates to 60p and 33p, the trade body estimates.
The CBI said: “It is a sneaky and unfair tax because of how outdated the rates are.”
All types of businesses, from small to large, are affected.
Among those refusing to travel are mechanics, area managers, van and truck drivers, warehouse staff, engineers and IT teams. If employers were to reimburse them for mileage at a rate higher than the current AMAP rates, they would be required to pay the employer’s national insurance the additional amount.
And employees would also have to pay income tax and employee national insurance on the sum.
Mohammad Jamai, director of economic policy at the CBI, said: ‘The Chancellor has a real opportunity to show he is on the side of motorists and workers who make vital business journeys every day.
‘By increasing tax-free mileage rates, you can ease financial pressure on workers and their employers, and encourage more business travel to increase productivity.
“It is crucial that the government removes barriers to growth.”