Mileage and Car allowance

J

Josvill2010

Registered User
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87
Hi,

If someone claims mileage at 59.07 cents per km and also €500 per month for a car allowance. The car allowance is subject to the hight rate I would assume.

But can someone claim mileage if they are using a company car? I thought the purspose of mileage was to reimburse the cost of petrol, but also insurance and wear and tear.

If I am getting a car allowance plus mileage that would seem excessive.
For instance if I get 15km for 1 Ltr. This is €1.50 for 15 km but I claim mileage and I get 0.5907x15km, this is €8.86. I am making a profit of 7.36 € a litre.

Is there any legal/tax provision against this?

Many thanks,
j
 
Read this page from Revenue's website. Look at the table near the bottom of the page.
The best thing to do is look at the lowest rate allowable for civil service rates and use that.
You are right; you are getting way too much.
 
Josvill2010 said:
Hi,

If someone claims mileage at 59.07 cents per km and also €500 per month for a car allowance. The car allowance is subject to the hight rate I would assume.

But can someone claim mileage if they are using a company car? I thought the purspose of mileage was to reimburse the cost of petrol, but also insurance and wear and tear.

If I am getting a car allowance plus mileage that would seem excessive.
For instance if I get 15km for 1 Ltr. This is €1.50 for 15 km but I claim mileage and I get 0.5907x15km, this is €8.86. I am making a profit of 7.36 € a litre.

Is there any legal/tax provision against this?

Many thanks,
j
Click to expand...

Hold on, is it a company car, or is it a vehicle you bought (which they give you a taxed allowance of €500 per month for)?

If it's your vehicle, taxed and insured etc... by you, and your employers are taxing the monthly round sum "allowance", then you are still entitled to be paid mileage at the appropriate civil service rate, for your business mileage in a car owned and maintained by you. (It doesn't matter to Revenue what name is put on that €500 per month - it could be a "wearing trousers to work" allowance for all they care, as long as it's taxed it is just considered part of your salary package.)

If it is a company car on the other hand, taxed, insured and fuel paid for by the company, then you're not entitled to a bean tax-free, since you don't actually incur any of the expenses.
 
Thats right. It is a taxed allowance. I like your analogy of 'wearing trousers to work'.

As for the other case, company car provided by the company, where in the revenue can It be found that you cannot claim the tax allowance
Thanks Mandelbrot
 
I am in exactly the same situation, i receive €9.5k per year car allowance (having opted out of company car scheme) which is subject to normal tax, PRSI etc. (comes through payroll) and claim 59.07c for the first 6438km and 28.46c for every km after. As far as i am aware it is not needed to be declared.
 
Josvill2010 said:
As for the other case, company car provided by the company, where in the revenue can It be found that you cannot claim the tax allowance
Click to expand...

Employees' Motoring/Bicycle Expenses (IT51) - This leaflet covers re-imbursement of Motoring/Bicycle Expenses to Employees (including Directors)............

I'd say 're-imbursement' pretty much covers that.
 
flossie said:
I am in exactly the same situation, i receive €9.5k per year car allowance (having opted out of company car scheme) which is subject to normal tax, PRSI etc. (comes through payroll) and claim 59.07c for the first 6438km and 28.46c for every km after. As far as i am aware it is not needed to be declared.
Click to expand...


correct
 
Josvill2010 said:
As for the other case, company car provided by the company, where in the revenue can It be found that you cannot claim the tax allowance
Click to expand...

I'm not sure that I understand exactly what you're asking there. It clearly states in IT51 http://www.revenue.ie/en/tax/it/leaflets/it51.html that



"Where employees use their private cars, motorcycles or bicycles for business purposes, and the employees incur the total cost of such usage (e.g. insurance, tax, running costs, etc.), then the reimbursement in respect of the cost of business use can be made free of tax by the employer by reference to either -
  • flat-rate kilometric allowances (see A below); or
  • actual costs incurred (see B below)."
So if you drive a company vehicle on a business journey then you aren't entitled to any tax-free expenses in respect of the journey, because you haven't borne the cost of the journey, your employer has (i.e. the costs of wear and tear, maintenance, fuel, tax and insurance).

If you drive your own vehicle then of course you are allowed to be reimbursed by your employer, either on the basis of the actual incurred expense (which in practice would be a nightmare to try and calculate), or by payment of a flat rate per mile / per km.

To the extent that the rate you are paid is equal to, or less than, the civil service rate, then it may be made tax-free. But there is nothing to stop your employer from paying you €10 per km if they want, so long as they operate PAYE/PRSI on the €9.41 per km by which that rate exceeds the civil service rate.

I hope that all makes sense.
 
Mandelbrot,

Thanks for all the details in your explanation. It solved the issue.

Summary:
Company car + Mileage claim = No allow
private car + mileage claim + car allowancce = Allow (it works better for the EE)
Mileage claim over public sector rates = allow but BIK on diff

Thanks,
j
 
No.

Firstly, car allowance is taxable through the payroll system.
Company car = no mileage claim.
Private car = mileage claim.

You can't claim over the civil service rates. If you do, the full amount becomes taxable.

As regards which is better, company car or private, there are numerous threads on the topic. It really depends on individual circumstances and isn't as straight forward as you think. For example, you would have used after tax income to purchase the private car. Consider the opportunity cost of this?
 
Paddy199,
Thanks for pointing out that if you claim above the civil rates the full amount becomes taxable
Regards,
jose
 
Paddy199 said:
You can't claim over the civil service rates. If you do, the full amount becomes taxable.
Click to expand...

I don't think this is the case - you are entitled to a flat rate expense up to the civil service rate - if you exceed that rate then it is the excess that is taxable...

I've seen several cases where companies failed to operate the reduced rates for several months after the last reduction in the civil service rates, and after the year-end made voluntary disclosures / self-corrections to tax the excess that was paid tax-free.
 
mandelbrot said:
you are entitled to a flat rate expense up to the civil service rate
Click to expand...
Correct once you make the correct claim with the necessary backup.

You must get Revenue Approval to apply any rate above that of the civil service rate. If you havent got the approval, its not a correct claim and is disallowable. Now you could argue your case with the Revenue official and they may allow you to redo the claim but they are not oblidged to. I certainly would not be advising it to any of my clients to make false claims.

I suppose another way of looking at it - if its not a flat rate allowance its something else. The only other thing it can be is a lump sum payment and lump sum allowances are always subject to income taxes.

It's either one or the other, it can't be both.

In the case you mention that was a genuine mistake and then corrected, thats fine. I'm talking about deliberate excessive rates.

[Statement of Practice (SP - IT/2/07) paragraph 2.8 refers]
 
Paddy199 said:
[Statement of Practice (SP - IT/2/07) paragraph 2.8 refers]
Click to expand...

I see where you're coming from alright but my reading of that paragraph doesn't lead me to believe that just because it's above the CS rate means it ceases to be a flat rate payment and becomes a round sum. There are plenty of areas where items are apportioned between an allowable and a disallowable element, or a taxable and non-taxable element (the adjustments to BIK on company cars being the most closely related example I can think of).

It doesn't state that the entire payment will be subject to tax just because the flat rate used exceeds the CS rate; just that any flat-rate amounts up to the CS rate will be disregarded. It's a bit ambiguous really.

I doubt very much that an Inspector in an audit situation, if they encountered a situation where an employer paid a rate above the CS rate and taxed the excess, could/would have a problem. If such an assertion were to be made by a Revenue official I believe the aggrieved party could argue that they were being unfairly taxed, as they had been reimbursed at a flat rate, but not had the benefit of any amount tax-free, and therefore been inequitably treated by comparison to any other taxpayer...
 
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