Inaccurate completion of P11D forms (the annual return of benefits and expenses) is a major issue in the fleet industry, according to tax experts.

“I’ve seen an enormous number of errors on P11D forms,” says Alastair Kendrick, of international accountancy firm Mazars.

He has been in the tax industry for 40 years and was an inspector of taxes for 20 years.

“Over the last three or four years I’ve seen several thousand incorrect forms in relation to cars.”

An incorrect P11D form could lead to a company being fined up to £3,000.

In addition, if a form is submitted after the July 6 deadline it could result in a penalty of up to £300 and a further charge of up to £60 a day for each day the form is late.

Alison Haynes, tax partner at Deloitte, has never known HM Revenue & Customs (HMRC) impose such a high penalty but urges companies not to be complacent.

“Give P11Ds the attention they need and submit them in good time,” she says.
The task of completing P11Ds usually falls upon HR or finance departments, but it is incumbent upon fleet operators to provide accurate information for P11Ds.

Gary Black, fleet manager at Inspired Gaming, gives a download of driver movements to the payroll department and they then produce the forms.

Or, if the fleet operator works in HR, such as Tina Samson, reward manager at Punch Taverns, the responsibility of completing P11Ds could fall on their department.

Nick Davies, director of reward and employment tax at Armstrong Watson, describes the P11D process as “a data-gathering exercise”.

He says: “The fleet manager will need the make and model of the car, the date of registration, the fuel type, the CO2 emissions, the list price, the cost of any accessories and the dates of use.

"They’ll also need to say whether any private fuel has been provided and whether the employee has made any capital contribution or any private use contribution.”

ACFO chairman Julie Jenner says: “It’s a fairly hefty job, but it’s less onerous than it used to be.

“I’d advise fleet operators to gather the data needed for P11Ds on a quarterly basis, at the same time as they complete the P46s.

"They could use the fleet software that’s available or they could devise their own system.”

Marie Jarrold, car fleet controller at BCA, uses Jaama’s fleet software and says that the P11D module works well.

“We have very minimal involvement with P11Ds,” she says.

“We have only 20 drivers that we need to P11D, as most are on the company ownership scheme.

"But we’ve never made any mistakes. We follow the HMRC guidelines rigidly and we’re very aware of the penalties.”

Most companies will guard against errors by giving a draft copy of a P11D form to an employee, before submitting it to HMRC.

This gives the driver the opportunity to challenge things like the CO2 figure, or the date the car was allocated. It also gives fleet managers the chance to pick up on mistakes.

Under-reporting of fuel

The part of the form concerning fuel is most at risk of inaccuracies. Haynes describes it as “a thorny area”.

“If the company is happy to pay private and business fuel that’s fine,” she says.

“But if not, they need to write to company car drivers saying that they don’t intend to provide private fuel and that all private fuel has to be reimbursed.”

Fleet managers should also ensure mileage is recorded accurately. “The onus is on the employee to record business mileage accurately, but it is important that the employer undertakes routine checks,” says Davies.

“We advise our clients to require drivers to include postcodes in business mileage logs so they can be checked.”

Davies reveals the case of one company that paid a hefty price for failing to have adequate checks in place.

“All the company car drivers had fuel cards and they were required to reimburse the cost of private fuel to the company each month,” Davies explains.

“They kept logs of business and private mileage and this was used to calculate the amount to reimburse.

“The problem was that the company hadn’t carried out any checks on the mileage claims, and when HMRC came to conduct a review it was very clear that the business mileage was inaccurate.

"The miles were all rounded figures and there were return trips from Sheffield to Leeds, which should been about 60 miles, filled in as 90 miles.

“As a result of the inaccuracy of the mileage records, HMRC claimed that not all of the private miles had been reimbursed by the drivers. This meant that the fuel benefits had to apply. And it wasn’t just for that year, it went back six years.”

So, what was the outcome?

“The company had to settle the liability on behalf of the 35 employees on a ‘grossed-up’ basis and interest was also charged for late payment, going back six years,” Davies says.

“It resulted in a settlement of about £250,000.”

Davies admits this is the largest amount he has seen a company settle, and that it happened five years ago.

However, he believes that not having the correct checks in place for private fuel is a common mistake that companies of all sizes make.

In the past year he has seen four similar cases.

“The message is to communicate and educate drivers,” he continues. “They need to know what constitutes business mileage and what doesn’t.”

Kendrick adds: “If a company has a policy in place and carries out the necessary checks then HMRC shouldn’t hold them responsible as they have been ripped off by a fraudulent employee.

"And it’s gross misconduct from an HR perspective.”

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Incorrect dates

The dates a vehicle has been available to an employee are often given incorrectly on P11Ds.

“It’s a major issue,” says Kendrick.

“Often the leasing company gives data on cars, such as the return date of the vehicle and they may make a mistake like putting the vehicle was returned on May 5, when in fact it was April 5.

"The poor employee ends up being taxed on a car for a longer period.

"I’ve also seen the date the car went to auction being used, rather than the date the car was returned.

"So fleet managers should check that the information from their leasing company is correct.”

Haynes has also seen mistakes being made with dates.

“Fleet managers need to be careful with employee arrival and leaving dates and when people have been promoted.”

She advises fleet managers to keep accurate records of who’s driving what car and when.

“Check how many cars an employee has had at a given time,” she says.

“And when you add up how many days someone has had a car, if there are more than 365 question whether they have had two cars.”

Pool cars

Missing pool cars off P11D forms is a common mistake.

If a pool car meets HMRC’s criteria (it is used only for business purposes and any private use is incidental) then it is fine to leave it off the form, but if there is any private use then it needs to be included.

“The problem is that incidental use isn’t defined,” says Davies.

“The example given is that if someone has to do a business journey the next day and it’s an early start they can take the vehicle home overnight.

"But if employees are continually taking pool cars home, the Revenue may contest it.

"A pool car should be kept at business premises overnight and any excuses about taking the car home for security reasons will not be accepted.

“Also, a pool car shouldn’t be used by one individual to the exclusion of others.

"My advice is to keep a mileage log in the car and fill in who used it, when it was used and the purpose of the journey.”

Kendrick says hire cars need to be declared if they are available for private use too.

“If someone has just joined the company and they get a hire car it often doesn’t get reported. But, in effect, it’s a company car.”

Vans

Private use of vans is treated slightly differently to cars. HMRC allows drivers to use their vans from home to work, but other use, such as taking it on holiday or using it to make trips to the supermarket, is not allowed.

In addition to a £3,000 benefit-in-kind charge for private use of vans, HMRC can impose a £500 private fuel benefit.

“HMRC is on the lookout for vans being used privately,” says Davies.

“Last year, for instance, a van was parked in a supermarket car park on a weekend and it was spotted by a tax inspector.

"Luckily, the employer was able to demonstrate that the van was there because the driver was fixing a gas leak in the supermarket, and it wasn’t private use.”

Other common errors

Davies says other mistakes fleet managers make include incorrect list price, missing off accessories, inaccurate CO2 emissions and wrong fuel type.

He warns against employers filling in P11Ds using the same details from the previous year’s form.

If a fleet manager or employer does realise a mistake has been made, the HMRC advises them to get in touch as soon as possible.

An HMRC spokesman says: “We attempt to help individuals and companies meet their tax obligations and when an individual or company has made an error in any of the details they have forwarded us they should let us know as soon as possible.”

As to whether the maximum penalty for an error would be imposed, he said: “Each case would be dealt with on its merits.”

Fleet managers can’t afford to be complacent and must carry out the necessary checks.

If you’re having difficulty completing P11D forms, you can phone HMRC’s employer helpline on 08457 143 143.