Mileage Expense Claims: Calculating employee expenses for business travel

Not all businesses provide a company car for employee business travel. When employees use their own vehicle for a work-related journey, a mileage expense claim form must be issued, completed, and processed.

So, when should these forms be used, how often, and for what types of vehicles? This article gives you all the answers you need to optimise your mileage reimbursement processes.

 

What is a business mileage claim form?

A business mileage claim form is a document used to record and calculate the amount reimbursed to employees for work-related journeys made on behalf of the company.

This means that if an employee has used their own rather than a company vehicle to make business journeys, they need to be reimbursed via mileage expenses. The business mileage claim form calculates the amount owed.

The allowance amount can either be calculated using;

-        HM Revenue and Customs (HMRC) approved mileage rates and allowances, 

-        an internal rate set by the company

What kinds of journeys are covered?

Usually, work-related journeys are recorded as having the company’s offices as the point of departure on mileage claims. This means, travel between an employee’s home address and their place of work cannot be reimbursed, although there may be an exception for travel to temporary workplaces or where the employee is recognised as a ‘contractual home-based employee’.

What types of vehicles are covered?

HMRC rates for the 2021/2022 tax year allow you to pay an ‘approved amount’ of MAPs (Mileage Allowance Payments) directly to employees without needing to report them.

HMRC has different approved mileage rates depending on:

  • the type of vehicle
  • the distance travelled

The different types of vehicles are:

  • cars and vans
  • motorcycles
  • bicycles

Top tip! HMRC approves a 5p per passenger per business mile rate for carrying fellow employees in a car or van. However, your colleagues must also be travelling on business journeys.

In terms of the distance travelled in cars, there are two approved rates according to the number of business miles travelled in a single tax year:

  • up to 10,000 business miles per tax year, and
  • over 10,000 business miles per tax year.

Motorcycle and bicycle business mileage expenses

HMRC has published approved business mileage rates for motorcycles and bicycles. These are constant, remaining the same over 10,000 business miles per tax year.

 

Calculating the distance travelled for business mileage expense claims

The company must set out an accepted norm regarding how distances are calculated and stated on an expense claim.

Some expense claim management apps have integrated GPS, which is an ideal solution for automating the recording of the distance of each business journey. 

When should business mileage expense forms be completed?

Although there is no legal deadline, most organisations process employee expense claim forms on a fortnightly or monthly basis. Ideally, expense claim forms would be automated so they can be produced quickly and on a regular basis.

New solutions to support you

The repetitive nature of processing mileage expense forms can be a particularly time-consuming task. Today, new solutions are emerging to support you and handle these types of claims.

Like the Jenji mobile app, it makes it much easier for employees to deal with their expense claims, to enter their journey using Google Maps, set mileage for regular journeys, automatically calculate mileage expenses, etc. It is a whole new ecosystem that streamlines the reimbursement process.

From the point of view of the business, having this type of expense claim management software protects against errors and possible fraud while also offering advanced functionalities for expense management.

2021/22 Tax Year HMRC Approved Mileage Allowance Payments (6 April to 5 April)

Vehicle

First 10,000 miles in the tax year

Each business mile over 10,000 in the tax year

Cars and vans

45p

25p

Motor cycles

24p

24p

Bicycles

20p

20p

Source:  https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax

Maria Khizhniakova