§ Mr. RedmondTo ask the Chancellor of the Exchequer if he will reconsider his decision to tax hospital car service volunteer drivers' mileage allowances; and if he will make a statement.
§ Mr. DorrellThe position in law is that motor mileage allowances paid to individuals, whether employees or volunteer drivers, who use a car on health service business are liable to income tax if, and only if, the allowances exceed the costs of running and maintaining the car for health service driving and so result in a profit.
While I am very much aware of the important and valuable service provided by volunteer drivers, I am not persuaded that there is a case for amending the law to exempt them from tax on any profits on their mileage allowances. But, as the hon. Member may be aware, it has been decided to phase in the arrangements which were introduced last year for collecting tax on these allowances. For the period from 6 October 1991 to 5 April 1993 only one quarter of the profit element will be taxed; for the tax year 1993–94, one half of the profit will be taxed; and for the tax year 1994–95 three quarters of the profit will be taxed. Tax will not be payable on the full amount of the profit element until 1995–96.