Tax relief for business travel: Prove it!

The tax system in the UK offers tax reliefs and exemptions to employees (including company directors) and the self-employed for various costs etc. relating to their work. However, these tax deductions generally come with strings attached in the form of conditions and record keeping requirements.

A useful tax exemption is available for payments by employers to employees for business travel in their own cars, up to a certain level (‘approved mileage allowance payments’), i.e. 45p per mile for the first 10,000 miles in the tax year, and 25p per mile after that (ITEPA 2003, s 230).

Tax relief for use of own car

A deduction is also available (for example) to employees for business travel in their own cars who receive lower mileage allowance payments than the approved amounts mentioned above (ITEPA 2003, s 231). This deduction is named ‘mileage allowance relief’ (MAR). The amount of MAR to which the employee is entitled is the difference between the total mileage payments (if any) to the employee in respect of the vehicle and the approved amounts applicable.

HM Revenue and Customs (HMRC) guidance indicates that MAR is flexible. For example, it is not a requirement that employees must be obliged to use their own cars to claim the relief, but simply that the employee is obliged to make the business journey. For example, HMRC confirms that MAR may be available if the person could have used transport provided by the employer but chose to use their own car.

In addition, there is no restriction in MAR where the employee received no mileage allowance from their employer despite a claim being available, because (say) they chose not to claim, or because they failed to do so in the time allowed by the employer (see HMRC’s Employment Income manual at EIM31340).

Whose vehicle?

‘Business travel’ is defined for these purposes (in ITEPA 2003, s 236(1)), broadly as travelling the expenses of which would, if they had been incurred and paid by the employee, would have been deductible under the general tax rules for travel expenses (in ITEPA 2003, s 337 to 342). For example, the travel must not be prevented from being business travel by being ‘ordinary commuting’ (such as from home to permanent workplace) or private travel (such as on holidays).

HMRC’s guidance states that entitlement to MAR requires an employee to use their own vehicle for business travel. The MAR legislation does not explicitly state this requirement (but company cars are specifically excluded), although HMRC accepts that the MAR rules still apply if, for example, the employee uses their spouse’s car instead of their own car (provided of course that the spouse’s car is not itself a company vehicle) (EIM31255).

In O’Sullivan v Revenue and Customs [2017] UKFTT 827 (TC), the taxpayer claimed MAR but it was unclear from the evidence whether he had used his own vehicle for the business travel, or whether he had travelled as a passenger in a van provided by his employer at the relevant times, or whether he had used a car owned by his father (who worked with the taxpayer, along with his brothers). The First-tier Tribunal refused to accept the taxpayer’s assertions that he had used his own transport to go to work in the absence of relevant supporting evidence. The taxpayer’s claim for MAR failed.

Total and business mileage

HMRC’s enquiry into the taxpayer’s MAR claim in O’Sullivan involved requests for information including documentary evidence confirming the taxpayer’s travel, together with details of annual mileage for the tax year in question, and a daily mileage log confirming the business miles travelled.

The First-tier Tribunal noted (among other things) that no MOT certificates for the vehicle in question had been produced to vouch for the mileage purported to have been travelled. In practice, HMRC will often request MOT certificates for the employee’s vehicle (if applicable) covering the tax year of the MAR claim. Of course, this exercise only confirms that the vehicle has recorded the requisite mileage. The next hurdle is to demonstrate that the mileage on which the MAR claim is based represents qualifying business travel. A detailed business mileage log is generally helpful evidence.

Practical point

Employees whose actual expenditure on the vehicle (including insurance, repairs, loan interest relief) is less than the MAR amount is not chargeable to tax on the difference (EIM31335). On the other hand, if actual expenditure is greater than the MAR amount, no additional tax relief is due. Travel related expenses not covered by the MAR rules (e.g. parking and hotel expenses) are subject to the normal tax relief rules for travel and subsistence.

The above article was first published in Tax Insider (June 2018) (

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