Unchanged AMAP Rates Make Company Cars More Attractive

Tuesday, 15. July 2008

As the Government stands firm on it’s 6 year old Approved Mileage Allowance Payments (AMAP) you should now consider the real benefits of paying for your own car personally and charging the business compared to having a company car. To remind you the AMAP rates are 40 pence per mile for the first 10,000 business miles and 25 pence per mile thereafter. The charge is tax and NI free but even 40% taxpayers are seeing the benefits badly eroded. The charge is to recover not just fuel but all other related cost, including depreciation, road fund licence, repairs and maintenance, finance charges and insurance costs. Whilst it could be argued that much of this cost is incremental, ie. as the car is funded by the driver and used personally he would have had to have the car serviced and repaired and paid for insurance etc so he only has the additional costs to fund out of the AMAP’s, some say that the rates now fall short of the actual costs. Fuel prices have increased, used car prices have fallen dramatically – increasing depreciation costs, service and repair cost have increased and interest rates are on the way up. In fact the AA has calculated that the average petrol car costing between £13,000 and £20,000 covering 10,000 miles per annum has standing charges and running costs of 63.03 pence per mile. Under the AMAP system the driver would receive £4,000 (40ppm) but the cost would be £6,303 losing the employee £2,303. Whilst some have seen this stance taken by the Government to be consistent with their green policy and encourage drivers to buy cars that are cheaper to run and produce better fuel consumption those in the real world believe that drivers may well miss services, omit business cover from their insurance and fit part worn tyres instead of new tyres to keep costs down leaving the employer exposed under the very tight health and safety regulations. I have always been a great believer in company cars and this may well push more people out of private cars into company cars. Good!!! Better check your costings, you may be in for a shock.