ALD Automotive’s Net Mileage Plan Saves Companies £££’s On NI Bills

ALD Automotive, the leading contract hire and leasing company, has introduced Net Mileage Plan as a new component within its AutoSolutions portfolio and is letting businesses across Britain know that they could save themselves thousands of pounds in National Insurance contributions by amending the way they reimburse mileage payments to employees who take cash in lieu of a company car.

AutoSolutions is a unique total cost of ownership fleet software programme that analyses every factor, corporate and personal, impacting on vehicle funding, car choice and services. Analysed from both the perspective of the employers and the employees it ensures that the optimum benefits package is selected on an individual basis.

Net Mileage Plan uses the maximum HM Revenue and Customs’ tax and National Insurance contribution-free mileage reimbursement rate – 40p a mile – to reduce the gross cash allowance paid to employees without changing the net amount each person receives. As a result of utilising the tax-free Approved Mileage Allowance Payments system in this way, employers can significantly reduce their National Insurance contribution (currently 12.8%) due on the cash allowance.

ALD Automotive recently calculated one of its client’s offering drivers cash in lieu of a company car could save £500,000 a year from its National Insurance bill, whilst a second client was calculated to be able to save approximately £100,000 a year.

Helen Fisk, manager of ALD Automotive’s AutoSolutions team, said: “Instead of, for example, an employer paying a cash allowance in lieu of a company car and 10p per business mile travelled, employers should pay the full tax-free 40p a mile rate and correspondingly decrease the monthly cash allowance. While the cash element continues to be taxed as salary, the mileage element is tax and National Insurance free.”

She added: “In some cases companies are unaware how tax and NIC-free mileage allowances can be used to help them cut costs. Our belief is that many organisations can cut their National Insurance bills significantly by using a dedicated software programme such as Net Mileage Plan to manage and administer mileage and payroll adjustments on a monthly basis.”

Although employees’ financial position remains neutral, they actually benefit because they receive tax relief on business mileage in ‘real time’ and not annually in arrears via a tax return.

As Ms Fisk explained: “Employees who are reimbursed at 10p per mile can claim tax relief at the end of the tax year on the difference with the full 40p per mile allowed under HMRC rules. However, this leaves employees effectively out of pocket for a period of time and with administratively complex forms to complete to gain the tax benefit.

“However, anecdotal evidence suggests that many employees who are reimbursed business mileage below the HMRC approved level either do not know they can reclaim the difference or do not bother to. As a result, employees who do not claim the full tax-free allowance will be financially better off as a result of Net Mileage Plan.”

Critically, to take advantage of Net Mileage Plan and satisfy HMRC rules, businesses must be able to accurately capture employees’ mileage on a monthly basis. Using Net Mileage Plan, ALD Automotive will undertake mileage reconciliation on behalf of customers.

Ms Fisk said: “We will effectively and efficiently manage the reimbursement of the driver. We receive a mileage feed from drivers or employer with payroll data and then make the calculations on a monthly basis to reflect the 40p per mile payment, which ensures the tax-free allowance is fully utilised. The information is then returned to the client to enable the completion of each month’s payroll run.”

Author: Amanda White, November 22, 2009
Filed under: ALD Automotive,Fleet news

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