Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the feasibility of increasing the standard mileage and fuel rates in line with inflation.

Approved Mileage Allowance Payments (AMAPs) are used by employers to reimburse an employee’s expenses for business mileage in their private vehicle.

The government sets the AMAP rates to minimise administrative burdens. The AMAP rates aim to reflect running costs including fuel, servicing and depreciation. Depreciation is estimated to constitute the most significant proportion of the AMAP rates.

Employers are not required to use the AMAPs rates. Instead, they can agree to reimburse a different amount that better reflects their employees’ circumstances. If an employee is paid less than the AMAP rate, they can claim Mileage Allowance Relief (MAR) on the shortfall. However, where payments exceed the relevant AMAP rate, there will be a tax and National Insurance charge on the difference.

Like all taxes and allowances, the Government keeps the AMAP rate under review.

The Government also sets out Advisory Fuel Rates (AFR) for company car users. These rates reflect average miles per gallon (MPG) for vehicle types from manufacturers’ information, taking into account annual sales to businesses, combined with petrol and diesel prices.

AFRs are not mandatory, and employers and employees can agree to use different rates to reflect scenarios in which a car is more fuel efficient or where the fuel cost per mile of business travel is higher. Where an employer pays a rate higher than the published AFRs, no tax charge will arise if the employee is able to demonstrate there is no profit element.

The AFRs are reviewed by HMRC on a quarterly basis.