No liability to income tax arises in respect of approved mileage allowance payments for a car, van, motor cycle or cycle. However, this exemption does not apply if the employee is a passenger in the vehicle or the vehicle is a company vehicle (ITEPA 2003, s. 229(1), (4). This rule requires several key terms to be defined, as follows.

Mileage allowance payments

For these purposes, ‘mileage allowance payments’ are amounts (other than ‘passenger payments’ (see ¶432-150) that are paid to an employee in respect of expenses in connection with the use by him for business travel of a vehicle to which ITEPA 2003, Pt. 4, Ch. 2 applies (ITEPA 2003, s. 229(2)).

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