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How thorough are your mileage records?
6 October 21 | By: Jas Jhooty
In this blog, we discuss the compliance issues surrounding mileage records, especially when it concerns satisfying HMRC.
Examining mileage records in great detail will be the favourite activity of the taxman at the time of your next Employer Compliance Review. This is because the repercussions of not keeping mileage records in enough detail will quickly result in a massive settlement figure for you to pay.
Company cars without a car fuel benefit
The biggest danger area is in instances where you return a company car on an employee’s P11D form without a corresponding car fuel benefit. This is a like a red rag to a bull to HMRC as the repercussions for making even the slightest mistake in your mileage record keeping will result in the full car fuel benefit being chargeable. This is because car fuel benefit is seen as an “all or nothing” charge. In other words even if one mile of private fuel is paid for by the employer the full car fuel benefit becomes applicable for the whole of the period that the employee has the use of the company car.
Inadequate journey detailsDon’t forget that to HMRC you are guilty in the first instance and it is up to you to prove your innocence. This becomes extremely hard to do if you have reimbursed employees for mileage costs based on expenses sheets that simply do not provide enough information to satisfy HMRC. Most expenses claim forms do not have enough space to record: -
- the reason for the journey,
- who the employee went to see &
- the precise to and from locations (postcodes are obviously preferable).
This is another favourite review item by HMRC and obviously is extremely easy for the Employer Compliance Officer to spot. If this is a common occurrence on your businesses mileage records then beware. HMRC commonly use route planner software and always argue that the shortest route should have been taken. This is because they automatically suspect employees of making exaggerated claims. Don’t forget that they are always trying to prove that you have reimbursed the employee for the costs of a private journey.
HMRC will want to know that you are checking whether not your employee has driven more than 10,000 business miles in their privately owned car. Where cumulative mileage is not being recorded you will have to jump through hoops examining every month’s mileage record for every employee just to prove to HMRC that you have not inadvertently paid someone 45p per mile when they may have exceeded 10,000 business miles.
Ordinary commutingHMRC will definitely be on the lookout for any reimbursements for home to office travel. These are not allowable in any circumstances including commonly cited excuses such as: -
- Weekend work
- Early starts to meet a deadline
- Transport strikes
How emTax can help
We hope we have illustrated that not recording adequate mileage details is a potential minefield that will go off in your face at the time of your next Employer Compliance Review. The costs of getting it wrong or not having enough detail at hand to fend off any spurious claims made by HMRC will be enormous. This is because HMRC will extrapolate any issues they find across the whole workforce and multiply this figure by multiple tax years to arrive at truly horrendous amounts they expect you to settle on.
If your mileage record keeping is not up to scratch then you will face an unwinnable battle to challenge these assumptions.
Please do not hesitate to contact us for help on how to redesign your expenses policy to render you audit-proof.