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Running a business with company vehicles is full of daily challenges, even for the most experienced fleet managers. While managing business mileage and the associated tax is top of many agendas, you may be surprised by how much modern telematics solutions are streamlining this admin burdening process.
In this document, we explore your company's responsibilities to managing business mileage claims accurately and the potentially damaging implications for not remaining HMRC compliant.
HMRC Guidance states that to support business mileage claims employees need to keep accurate records of all their work-related journeys. This includes details such as the date/location of the business trip, the purpose of the journey, and mileage covered. Your company may be asked from time-to-time to partake in an independent HMRC review of its business mileage records. Therefore it’s essential that your business has a robust process in place with records of the information required for HMRC to complete their review.
This includes and is not limited to:
1. The date of the journey
2. The start and end points of the journey
3. The mileage
4. The reason for the journey
5. The type of vehicle used
The authorised rates (AMAP) for business mileage reimbursement in cars and vans is 45p per mile for the first 10,000 business miles, then 25p per mile for any business miles in excess of 10,000.
Due to the tight HMRC ruling around mileage claims, it’s essential that businesses have a robust record keeping process in place. It’s not just the cost implications of the additional PAYE and NIC but also the time wasted.
A common overestimate can occur when calculating the difference between private and business mileage. This could occur due to drivers simply not knowing the guidelines to follow, a survey found that 56% of company car drivers are unaware of HMRC rules on reclaiming business mileage.
If your business uses fuel cards, make sure to check the expenditure regularly. Patterns in different levels of spending each month from the same employees can highlight possible inappropriate spending.
With TomTom Telematics you can get insights into:
· When and where the vehicles fuel card is being used.
· Cost on fuel purchases of single vehicles and your entire fleet.
· Amount of refuelled litres and fuel type.
· Fuel card purchase data presented in accessible in easy to read reports.
If an employee is logging very few personal miles, but a lot of business miles- you may need to investigate. Monitoring fill up patterns and fuel consumption can help identify issues with mileage claims, one study found that a telematics system identified a 50% difference in fuel economy being achieved in identical cars over similar journeys.
To help with making your employee’s mileage claims more accurate, we recommend using the same checking techniques as the HMRC. (For the full compliance list please consult your company HMRC compliance representative).
· Check 10% of your mileage records- If more than 10% of the claims that your employees have recorded end in ‘0’ or ‘5’ then it’s likely that their claims are being rounded up. In the grand scheme of things, a roundup here and there may not seem a lot, but across a large business this could really add up.
· Check for employees travelling to the same place regularly- If employees regularly attend the same place, on average more than two days a week, then the HMRC may consider this as their normal workplace. So this mileage would then become taxable.
· Check on fuel card spending- keep an eye on patterns of different levels of spending from the same employee, this will highlight possible inappropriate expenditure.
· Implement the ‘Lesser Than Rule’- if an employee has a meeting at a location (other than their normal workplace) and decides to drive home from there, their normal commute has been absorbed. If you adopt the ‘lesser than rule’ they claim whichever is lesser: the actual mileage travelled from their home to the location or the mileage that they would have claimed if they had travelled from their base to the location.
To make sure you're following the HMRC’s guidelines in full, read more here.
Employees will likely have questions when it comes to their mileage claims, here are some of the most commonly asked:
1. Are commuting miles deductible? Miles between an employee's home and their workplace are non-deductible. When an employee signs a contract to work for you, they're committing to the necessary commute.
2. Are estimates acceptable? To claim business mileage, it is recommended that your employees keep accurate records of the miles they have covered. The HMRC likely wouldn’t accept estimates, so you should follow the same procedure.
3. If my workplace changes temporarily can I deduct further miles? Employees can claim any miles that are further than their usual commute, for example: if their normal commute is 5 miles, but the temporary workplace is 8 miles away- they can only claim on the extra 3 miles.
TomTom Telematics makes logging mileage easier, it records all mileage undertaken by employees automatically. All the employee is required to do is register which journeys were for private, commute, or business purposes in the log book app.
For companies, keeping an electronic vehicle log book gives great peace of mind. It not only helps ensure that employee benefits are taxed accurately but also helps avoid penalties from HMRC.
The logbook app that can be used on your driver’s smartphones and tablets has machine learning technology that can use historic journey data to learn and then suggest trips in the future that can help save time and enhance the user experience.
Read more about the TomTom telematics mileage log book here.
To discover more on how a connected telematics solution can benefit your business departments please visit telematics islands.
Please note: The information in this blog post is meant for reference only. TomTom Telematics does not warrant or imply that the use of this text or its products or services can in itself guarantee compliance with your tax or legal obligations. To ensure compliance with these obligations you must always seek individual advice from a legal counsel or a qualified tax compliance specialist