Pre-Budget statement: Plans to retain car mileage system welcomed

It was widely believed that the government would reduce the mileage allowance for business travel by car to 36p per mile increasing the burden on employees. Employers currently pay 40p per mile to employees using their cars for business travel.

However, it was announced in the pre-Budget statement today that the current regime will exist until 2002 when the chancellor is expected to propose a new system of mileage rates.

Alastair Kendrick, tax partner at Ernst & Young, said: ‘It is welcome in the short-term but it would have been good to know what the new regime will be. There remains a lot of uncertainty.

‘This is an interim measure. We need to know what the long-term strategy will be.’

Kendrick and colleagues at E & Y said there was also disappointment over the retention of a reduction in the allowance after 4,000 business miles. ‘This creates more work for employers,’ he said.

‘If government is truly committed to cutting red tape for business then it should have got rid of this. It would make it easier for business.’

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