If a tax inspector picked through your mileage records would they be satisfactory?
One fleet manager, who did not wish to be named, thought the system he had in place was acceptable.
But the tax inspector found holes in the records and the company faced a six-figure fine.
This story isn’t untypical. There are plenty of cases of companies being hit with fines running into hundreds of thousands of pounds.
Paul Jackson, managing director of The Miles Consultancy (TMC), has even seen a 700-vehicle fleet face a fine of £4.1 million.
He, and other industry experts, say HMRC is getting tough in this area and companies need to be prepared.
What the law says
All companies have to keep mileage records to show how their vehicles are being used.
If the company doesn’t provide free fuel for private use to company car drivers its records must prove it.
This requires drivers to record ‘to’ and ‘from’ locations, the reason for the journey and the number of miles travelled.
The rules for vans are slightly different as they can be used for commuting without incurring tax. HMRC also allows ‘insignificant’ private use, such as a detour to drop children at school on the way to work or using the vehicle to take large household rubbish away occasionally.
Using the van to go on holiday or for regular trips to the supermarket is not acceptable, however.
Companies should keep mileage records and get employees to sign an agreement about use of the van.
How likely is an inspection?
HMRC aims to visit employers at least once every six years to carry out an employer compliance assurance visit. The examination of mileage records is a key part of this inspection.
Cases are also selected depending on the employer’s risk profile, according to Nick Davies, senior consultant – employer solutions at chartered accountants Barber Harrison & Platt.
“HMRC would generally view company cars being declared, but without a corresponding fuel benefit, as presenting a risk,” he says.
Paul Chater, sales director, Vertivia, suggests “the worst offenders” for issues such as late payments will be “highest on the ‘we need to visit’ list”.
Sixty of TMC’s 90 clients have had a visit from an HMRC inspector and many come to TMC following an inspection.
“If we take on four customers a month, three of them have had a visit,” Jackson says.
However, Adam Rollins, business development manager at mileage capture provider Midas FMS, adds: “We will never know how many companies have had HMRC visits as this information is not made public.”
What happens during an inspection?
The tax inspector will want to look at all records including payroll, expenses, mileage records, credit card statements and even petty cash.
This means that the accounts/finance departments are generally the first port of call.
Whether the fleet manager is involved depends on what data they are responsible for, according to Jackson.
If the fleet manager looks after fuel card data they might be called upon. But they will usually only be involved for a proportion of the visit.
Assuming the company is compliant, an inspection will typically last a couple of days, although it could be longer for a large company.
If any issues are found the inspection could drag on for 12 months and involve several visits.
“The outcome of the visit will depend on the quality of your records,” says Chater.
When examining mileage records the inspector will want to be satisfied that no fuel for private journeys has been provided.
J Williams - 26/09/2016 10:56
I get use and fuel fro private use i pay extra tax for my fuel do i need to complete and mileage return each month