Frozen Mileage Rate Rate’s A Stealth Tax On Voluntary Workers
STAFF who need their cars for work such as district nurses and volunteers who take pensioners to hospitals are among the people hit with a motoring stealth tax, it was claimed yesterday.
Anyone who uses their own car for business or voluntary work can be repaid up to 40p a mile tax free.
The same rate has applied since 2002 and the Westminster Government recently decided not to increase it despite rising crude-oil costs, which reached a record $126 (£63) per barrel on Friday.
In real terms the mileage rate has fallen by 15%, because inflation makes 40p in 2002 worth 47p today.
Motoring experts say car running costs have increased in the past six years.
While the smallest cars cost less than 40p per mile, cars typically used for long business journeys or to get nurses to remote farms cost more than 40p per mile.
Running costs for a Honda Accord, for example, range from 48p to 70p per mile if the car does 10,000 miles a year, according to company car magazine Fleet News.
Professor Garel Rhys, of Cardiff University Business School, said: “The mileage rate certainly has to be looked at again, but the Government is looking at every way to increase its taxation. It’s a good old-fashioned stealth tax from the Brown Treasury, as we can still call it.
“If these thresholds aren’t being increased, people in the voluntary services are being penalised for doing good works.”
Tim Shallcross, of the IAM Motoring Trust, said: “Even with low inflation there has to be around a 12 to 15% increase since 2002.
“The Government has just reviewed the rate and decided to do nothing. There’s an issue for consumers, especially for the voluntary sector, who, with the big hikes in fuel costs, are now potentially subsidising the service they drive for, out of their own pockets.
“Wales is particularly affected as we are always among the highest for fuel prices and our volunteers are liable to have further to drive.
“Although the Government doesn’t set the rate that employers pay, the Government’s mileage rate is used as the guideline by the vast majority and I would urge the Government to review the rate.”
Hubert Mathias, transport manager at Pembrokeshire County Council, said 75 volunteer drivers provided 17,000 journeys a year in Pembrokeshire with their own cars, carrying elderly people and children in council care.
“We pay them 40p a mile, to remain under the threshold where they have to start paying tax. We’ve asked the Inland Revenue for two and a half years when they’re going to review this rate,” he said.
“If you think how much fuel has gone up in two years, it’s ridiculous that they’re maintaining this 40p threshold. We’ve had a lot of volunteers grumbling, ‘If fuel goes up any more we won’t be able to do it’.
“We would like more volunteers but wouldn’t be able to get any more at the current costs.”
A Treasury spokeswoman said various factors, including encouraging people to buy more efficient cars, were balanced when reviewing the mileage rate.
“At the moment it’s remaining as it is. It’s not really a stealth tax. We’re giving them tax-free incentives, so it’s a benefit.”
‘I’m definitely out of pocket’
As the cost of fuel has risen, Sheila Hughes has cut back on the driving she does for the Crickhowell Voluntary Car Scheme, Powys.
She uses a Land-Rover Freelander to take elderly people to and from healthcare appointments, and is reimbursed 40p per mile.
The cost of running a diesel Freelander, assuming 10,000 miles a year, ranges from 55p to 85p per mile, according to Fleet News magazine.
“I need a decent sized car,” said Ms Hughes, who lives near Abergavenny.
“If you’re going to go up into the mountains picking people up, a little car isn’t much good. I’m definitely out of pocket. I’m paying about £1.20 a litre now. I don’t do quite so much now as I was doing.”
She claimed the Treasury ignored rural areas. “It’s all right for them in London, when they can jump on a bus every 10 minutes.”