Business Travel: Private Car Allowance

Lord Marlesford
asked Her Majesty's Government:

On what date the 40 pence per mile maximum non-taxable allowance for use of private cars for business travel was fixed by the HM Revenue and Customs; and what they estimate the figure would now be allowing (a) for change in the retail prices index and (b) the change in the AA and RAC calculated cost of motoring. [HL1379]

Lord Davies of Oldham
The tax-free mileage allowance is part of the approved mileage allowance payments (AMAPs) scheme which is a statutory scheme introduced with effect from April 2002. The allowance was set at a rate of 40p per mile for the first 10,000 business miles and at 25p per mile thereafter.

AMAPs cater for a wide range of car drivers and the rates are designed to take into account all relevant factors. They strike a balance between allowing the running costs of all cars, large and small, and delivering the Government's environmental policy.

The Government estimate that the increase in the 40p rate using the retail prices index would be 47p per mile for 2007-08. However, this index includes the prices of goods and services that are not directly related to the cost of motoring and it does not take into account the increase in fuel economy of cars manufactured since 2002. It is not possible to compare the rate with the AA and RAC calculated costs of motoring as costs depend on type of car, engine size, fuel type and miles driven.