Q&A – Can I claim a mileage allowance while using a courtesy car?

Q. I’m a director and co-owner of a company. I use my own car for business journeys for which the company pays me a mileage allowance at HMRC’s official rates. Last month my car was off the road for over three weeks for repair and the insurance company provided me with a courtesy car. Apart from fuel, the use of the car cost me nothing so can I still claim the mileage allowance?

A. It’s up to your company to decide if it still pays you the allowance, but if it does the tax and NI position is the same as if the car was your own. The tax and NI-free mileage allowance still applies. If your company didn’t pay an allowance or paid it at a rate less than HMRC’s official rate, you would be entitled to claim a tax deduction for the difference. The legislation says nothing about the ownership of the car, it merely says the exemption applies to amounts “paid to an employee for expenses related to the employee’s use of such a vehicle for business travel”. Therefore, even though your only direct cost of using the courtesy car is fuel, that is enough for the exemption to apply.

The exemption applies to the mileage allowance payment your company pays even though, apart from fuel, you incur no direct costs in relation to the courtesy car. Ownership of the car is not relevant.