Mileage reimbursement: advantages and disadvantages
Nelly - Editor-in-Chief
Do you remember Lieutenant Colombo's poorly maintained (French) car? Here was a man who used his personal car for business travel. Should you provide your employees with a vehicle or give them mileage allowances? Both options have their advantages and disadvantages. Let's find out
How do mileage allowances work?
These allowances operate according to a schedule provided by the Administration and updated annually. It takes into account the number of horsepower in the vehicle and the distance traveled to establish reimbursement rates. Mileage allowances take into account:
The purchase cost of the vehicle and its equipment
The annual insurance premium
The rates are quite interesting. For example, a salesman who drives 2000 km with a 4CV can be reimbursed 986 € (calculation based on the 2017 scale).
All expenses related to the use of the vehicle are included in these allowances. They cannot be paid by the company in addition to the mileage allowance. On the other hand, the company must pay the additional costs of parking and tolls.
Advantages and disadvantages
On the employer's side: paying mileage allowances exonerates the employer from any responsibility for the vehicle itself. This choice allows the company to avoid paying the tax on company vehicles (up to €4,000 per year). Please note that it is important to make sure that these allowances are well justified because the reimbursement of expenses is particularly supervised by the tax authorities. Indeed, as these sums are not subject to income tax, they may constitute a salary supplement not subject to taxation.
If the employer wants to limit the amount of the allowances, it can establish certain criteria related to the vehicle (for example, reimburse on the basis of a 4CV and not beyond). The employer can also evaluate travel in terms of its return on investment in order to limit low-ROI travel. It can frame this entire process in its travel policy.
In terms of image, the company is dependent on the choices of its employees. In some cases, the employee's personal vehicle is simply not adapted to the number or nature of the trips (there is no chase sc ene in Colombo!). The poorly-vehicled employee can then often find himself out of order and alter, for technical reasons, the company's progress.
On the employee side: as we have already pointed out, these allowances constitute additional income that is not subject to income tax. If a salesperson chooses to buy a new car, he or she can, thanks to the logic of the mileage allowances (which turn out to be quite substantial), pay it off fairly quickly. On the other hand, the maintenance of a car that is driven a lot can be costly and become a burden. The employee should also consider taking out professional insurance for this use of his vehicle.
In some cases, your employees may not want or be able to lend their vehicles for business purposes. You may not want to either because you prefer to control the entire process by choosing and maintaining the vehicle available to your business. If this is the case, consider equipping your mobile employees with a smart card that allows you to track and process expenses in real time. This way, you will optimize your travels, make your employees' life easier and manage all your expenses.