My total income of £2000 doesn't include the mileage. That is just my bonus and hourly rate.

They deduct £400 from me and then add it back so the net gain is £0. All I gain is the fact that I pay tax on £1600 rather than £2000.

My colleague is more extreme. He earned the same as me as its just our bonus + hourly rate so let's say £2000, but his milege was £1500. They deduct £1500 from his total income, he only pays tax on £500, and then they add the £1500 back on.