Approved Mileage Allowance Payment Rate

Debate between Gareth Davies and Peter Aldous

Monday 3rd July 2023 Westminster Hall

[Gareth Davies]

That is a very reasonable question. I do not have the figures to hand, but am happy to provide them if we are able to. I also point out that employees paid expenses above the AMAP rate may be taxed on the difference, depending on their personal circumstances—if they earn in excess of the personal allowance, for example.

As my hon. Friends the Members for Carshalton and Wallington and for Waveney (Peter Aldous), as well as several others across the Chamber, have outlined, volunteers are an important part of our communities and perform incredibly important services for all of us. It is right that they be highlighted and recognised in the debate today. The Government recognise the outstanding contribution that all volunteers and the charities that employ them make to our communities, including my community of Grantham and Stamford.

I should reassure hon. Members that, unlike employees, volunteers can receive payments in excess of the AMAP rate and do not have to pay tax if they can provide evidence that they have not made a profit. If they provide the receipts and evidence of their travel, they do not have to pay tax above the AMAP rate, unlike employees. That provides volunteers and voluntary organisations with additional flexibility, given how important they are. And they are important to the Government—that is why, for example, at the spring Budget the Chancellor set out an additional £100 million support package for charities and community organisations in England. That will be targeted at voluntary, community and social enterprise organisations at most risk at this difficult time. We will be setting out more about the eligibility criteria in due course, and hon. Members may wish to monitor that carefully.

[Peter Aldous]

That was an interesting point, and I just need to digest what the Minister was saying. I think he was saying that volunteer drivers can claim extra tax relief provided that they can show that they are not making a profit. Does he have any figures showing how many are actually doing that? I suggest that the system is so complicated that very few take it up. It would be far simpler to increase the rate.

[Gareth Davies]

The point I would make is that volunteer organisations do not need to use AMAPs; all that is required are receipts and evidence of journeys. Volunteer organisations can set literally any rate as long as that evidence is shown. The AMAP is a simplified rate and applies to employees of private organisations and businesses, for example.

I want to address the review period and the regularity of reviews, because they were mentioned by a number of colleagues. They make a fair point, but I would point out that by its very nature AMAP is a tax relief, as is mileage allowance relief. It is convention that they are reviewed at fiscal events, in line with most taxes we have, but it is also important for the work that we do with the Office for Budget Responsibility, so that it can score during the Budget process. That is why the reliefs are always reviewed. I assure hon. Members that there is a review at every fiscal event, and it is right that it is done at fiscal events and not in the middle of the fiscal events cycle.

A couple of Members mentioned self-employed individuals, so let me quickly address that issue. Self-employed individuals can choose to use simplified motoring expenses, which allows them to deduct a fixed rate per mile against their self-employed profits, and those rates mirror the AMAP rates. Self-employed individuals do not have to use the rates; they can instead choose to deduct capital allowances and actual costs. However, it is not possible to switch between the two options with the same car or van once a self-employed individual has chosen to use either the simplified mileage rate or the capital allowances and expenses. I hope that clarifies the position: they do have that choice.

Some hon. Members rightly talked about the cost of living situation in which we find ourselves. I want to directly address that now, because AMAPs are one part of our system to support employees across the country, but it is important to recognise the other measures that the Government are taking to support people at this very difficult time, and that is part of the review process when we look at AMAPs. I simply reiterate the point that many hon. Members have made today: in the spring Budget, the Chancellor announced continued support for both households and businesses by extending the temporary 5p fuel duty cut and cancelling the planned inflation rise for 2023-24. That represents a saving for all drivers across the country, amounting to £5 billion, which is about £100 per household.

In addition, at the spring Budget we went further by extending energy support, because we know that inflation has been a real problem for many households across the country. We kept the energy price guarantee at £2,500 for three months from April, saving households an additional £160 and bringing total Government support for energy bills to £1,500 for a typical household since October 2022.

Alongside that, we have gone even further and helped to support households by ending the premium paid by over 4 million households using prepayment meters across the United Kingdom. We have also introduced 30 hours of free childcare per week for working parents with children aged nine months to three years in England, alongside a substantial uplift in the hourly rate paid to providers and market reforms. That is in addition to the benefits uprating and support for vulnerable households across this country that we announced at the autumn statement, which included new cost of living payments for this year and next, helping more than 8 million UK households on eligible means-tested benefits, 8 million pensioner households and 6 million people across the country on disability benefits.

Taken together, we have provided £94 billion-worth of support to help households with higher bills, or an average of £3,300 per household, across 2022-23 and 2023-24. That is one of the largest packages of support in Europe, but as the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) pointed out, high inflation is the greatest immediate economic challenge that we face. That is why the Prime Minister has set it out as one of his top priorities, and it is why we in the Treasury have set out a clear plan to reduce inflation.

--- Later in debate ---

[Gareth Davies]

If a rate is provided that is above the AMAP rate, national insurance and income tax would be applied to that difference, depending on the personal circumstances of the individual—for example, depending on the overall amount of income tax they pay, or whether they are over the personal allowance amount. Voluntary organisations, which my hon. Friend spoke about, can offer any rate they want, as I pointed out to my hon. Friends the Members for Waveney, and for Carshalton and Wallington. So long as evidence is shown for the journeys, organisations do not have to use the AMAP rates. I hope that clarifies things.

In conclusion, it is ultimately for employers to determine the expenses paid in respect of motoring costs that employees incur with their private vehicles. The Government set AMAP and simplified expenses rates with the aim of creating administrative simplicity. Those rates will necessarily be more appropriate for some motorists than others. However, the Government have taken decisive steps to support households with the costs of living, which I have extensively set out. The Government will continue to keep AMAP and simplified expenses rates under review, as they do all taxes and allowances.

[Peter Aldous]

I have listened very carefully to my hon. Friend and I thank him for his response, but would he not agree that, over the past decade, there has been a societal change in the way that community transport has become a vital component of our public transport system, and in the way that health and social care is delivered? Health and care workers often go to people’s homes now, rather than those people coming to hospitals. That in itself warrants a fundamental review of the system.

[Gareth Davies]

My hon. Friend was just in the nick of time, but he makes a valid point. I will answer that in two parts. On care providers, the rate paid is a matter for the employer. It is entirely up to them, in the light of changes to how care is provided, to offer a rate that they deem appropriate; as I say, the NHS has offered a higher rate for those travelling fewer than 3,500 miles.

My hon. Friend made a broader point about the importance of community organisations, and mentioned community transportation. Those organisations are a vital part of our communities, particularly in constituencies like mine, in rural parts of the country. That is why this Government have got behind voluntary and community organisations. As I say, we recently announced another £100 million of support to specifically target charities and community organisations. That support will remain, just as it has for many years.

I am grateful for all the contributions and interventions from my hon. Friends, and from colleagues from across the House. This is an important debate to have, and I am pleased to have addressed the issue on behalf of the Government.