Current Issues

Motor Mileage Claims

TRAVEL CLAIM ‘CRACK DOWN’

There are many rules regarding the allowability of travel claims for tax purposes. Getting it wrong can cost the employee, or more likely his employer, substantial sums of money in back-tax, NIC and penalties.

HMRC is under great pressure from the Government to find additional tax revenues and it is searching the country for evermore sources. One source is from a failure of compliance regarding expenses claims.

It is the company who will face the charge relating to any tax-free payments allegedly made for 'phantom' business miles.

An inspector may visit to check your procedures for any reason or none. To avoid difficulties, employee mileage claims need to be accurate.

Many companies have faced HMRC penalties because of inaccurate and improperly checked mileage records. If a firm's records are not merely unchecked but also incomplete, even more draconian penalties may result.

• If a company cannot produce mileage records relating to all its past payments to drivers. HMRC may take the view that this means that the firm had effectively paid for some private fuel and therefore the drivers owe private fuel benefit tax and NIC going back up to six years. Such a company may find it necessary to pay the drivers' tax liabilities for them.
• The average individual liability for tax and NICs on private fuel benefit has been £1,300 per year. So if half of, say 50 claimants in a business are in the frame for exaggerating their mileage claims, the HMRC's six-year back tax calculation might be 25 x £1,300 x 6 = £195,000.
• Additionally, there may be fines and penalties.

However if you can show that your current claims are being properly checked and, if necessary, challenged and corrected, then the Revenue will be much less inclined to spend a lot of time in a detailed check of your records. It's not the presence of a few fiddles that does the damage, it's the absence of evidence that the company systematically checks claims.

WHAT HMRC IS LOOKING FOR
HMRC inspectors look for tell-tale signs of flaws in companies' mileage payments.

• Low private mileages: HMRC expects that most company car drivers will cover 30-40% of their total mileage on private journeys.
• Milometer discrepancies: Cars whose total milometer readings don't tally with total fuel purchases or with total mileage claimed in the year.
• Regular tanking up twice over a weekend': Drivers who frequently use their company fuel card to buy a tank full on both Friday and Monday.

AVOIDING AN INVESTIGATION

The way to keep the Revenue away from your past mileage records is to have a clean and transparent current expense process, which clearly deters drivers from making omissions and 'mistakes' -whether genuine or deliberate.