Y o u r M o n e y
Tax Relief on Duty Travel L
ieutenant Colonel Andrew Purdy from the Directorate of Service Personnel Policy asks, Are you getting everything you are due?
I was surprised recently to hear someone complaining that the rate of Motor Mileage Allowance (MMA) for duty journeys had gone down. It was reduced on 1 April this year from 31.2 pence per mile (ppm) to 25.0 ppm because the calculation includes an amount for the depreciation that your car suffers. During these economically recessed times the cost of new cars has gone down and the second hand value has held up so the depreciation is less. But the reason that I was surprised is that motor mileage is one of many business expenses that you can claim against Income Tax, so you will not be much out of pocket if you are prepared to do a bit of paperwork.
HM Revenue and Customs calculates that employers should pay 40p per mile for the first 10,000 business miles and 25 ppm thereafter; this is called the Approved Mileage Allowance Payment rate (AMAP). AMAPs are set by statute and are intended to cover the costs associated with using a private car for business journeys. So you can claim the full amount of the AMAP where no payment is received from your employer, or the difference between the AMAP and the amount received, where this is less. Where MMA is 25 ppm you can claim tax relief on the difference, i.e. on 15 pence per mile. The tax relief is given at your marginal rate of tax, that is, at the higher rate, 15 pence x 40%, or the basic rate, 15 pence x 20%.
Under the AMAP rules, you can claim tax relief in respect of the total business mileage undertaken. So, where the normal home to duty mileage is deducted from the business mileage travelled and the travel claim pays MMA for the difference, you can claim more for the element for which you receive no MMA. For example, if your duty journey is 100 miles and your MMA claim of 25 pence has been restricted to 93 miles, then you can claim tax relief as follows:
Amount received – 93 x 25 pence
Tax relief at basic rate – £16.75 x 20% Tax relief at higher rate – £16.75 x 40%
Approved Mileage Payment – 100 x 40 pence = £40.00 Difference
= £23.25 = £16.75
= £3.35 = £6.70
So a higher rate taxpayer would receive nearly one third more simply by completing the paperwork.
There is detailed guidance on mileage allowance payments on the HM Revenue & Customs website at:
www.hmrc.gov.uk/incometax/ how-to-get. Please note however that this tax relief does not apply to Home to Duty travel.
To claim this tax relief you should complete the business expenses section of your Self Assessment tax return if you have to submit one each year. A serving person is required to keep a record of JPA claims so, at the end of the tax year, go through the mileage claims and add up the miles. If you are not required to fill out a tax return you can use a form P87 Tax Relief for Expenses of Employment to tell HMRC about the expenses you want to ask for relief for or, after the first year of claiming you can just submit your claim by telephone.
None of this is special for Armed Forces personnel, it all applies to every taxpayer and is an example of what you can get back if you know the rules. There are many things that you can claim back against the Income Tax that you pay so look on the HMRC website at
www.hmrc.gov.uk to find out what else you could claim. If you let your home while you are in SFA, or you have another property that you receive rental income from, you should look at
www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/ TaxOnPropertyAndRentalIncome. Remember that your tax office has a duty to help you to reduce your tax bill, so if in doubt ring them up and ask for advice.
www.raf-ff.org.uk
Autumn 2010
39
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