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Claiming mileage: business mileage versus private mileage (and the perils of getting it wrong)

Mileage tax claim | MovolyticsWant to avoid an investigation from HMRC and the potential of a six-figure fine? Then it’s time to take your mileage claims seriously. Here’s how.

Tax: nobody’s favourite topic. Unfortunately it’s inescapable. And it doesn’t always have to be doom and gloom. After all, as a business with vehicles out on the road, you are entitled to tax relief on your fuel expenses. That’s great. But with HMRC cracking down on overclaims for mileage expenses, the need for accuracy has never been greater.

You know how it is. All businesses take an it-will-never-happen-to-me approach to tax investigations. But if the HMRC suspects your mileage claims are inaccurate, it’s alarmingly easy to end up with a business-shattering bill amounting to hundreds of thousands of pounds.

The importance of accurate mileage claims cannot be overstated. Yet that’s made all the more complicated when your drivers are using vehicles for personal use as well as business journeys. Fortunately there’s some good news. In this article we will explain how you can be sure of accurate mileage claims without any headaches at all.

What’s the problem?

As we said, HMRC are cracking down on inaccurate claims for mileage expenses. It’s not hard to see why. When mileage is overpaid, monies are effectively dished out to employees without the relevant rate of tax being applied.

Let’s say a driver – across the course of a year – has overstated business mileage by 20% on 30,000 business miles. If that claim went through, they would effectively have been paid tax-free for 6,000 business miles. That’s illegal tax relief and, in the eyes of the law, is no different from theft.

It’s why the suspicion of an overclaim on mileage is a magnet for an investigation from HRMC. And it’s the reason that in-depth, accurate journey logs and mileage claims are so important to the future of your business.

What happens if your mileage claims are investigated?

Firstly you can expect your productivity to suffer. The investigation process is laborious and time-consuming. You may even need to employ a tax expert or hire an accountant to assist with the process.

If you are found guilty of incorrect mileage claims, the bill could be severe. For each driver you will be charged for the outstanding tax due, plus any interest backdated to the year the tax should have been paid.

Your business will also be charged a penalty to dissuade you from making erroneous mileage claims in the future. Before long you could be looking at a bill for hundreds of thousands of pounds.

Another consequence of an unsuccessfully challenged tax investigation is the loss of your reputation. Not in the eyes of your customers or clients, but of HMRC. You see, each business has a risk rating based on how likely you are to default on payments and so on. Making faulty claims is likely to increase the risk of future investigations.

At this point it’s important to note that HMRC is not out there to bankrupt your business. If you genuinely cannot afford the bill they can discuss payment options with you as well as the extent of your penalty. But another consequence of losing your credibility with the taxman is that leniency is less likely to be shown with any future indiscretions.

How do faulty mileage claims occur?

There are lots of reasons for faulty mileage claims. It could be that you are not asking your drivers for the right information. Or perhaps you are not checking that drivers’ mileage data is accurate. It may even be that your drivers are flat-out lying to try and add a little extra to their monthly pay check.

Sure, there are lots of reasons for incorrect mileage claims. But there are no excuses. Not in the eyes of HMRC.

So what’s the proper way to manage your mileage expenses?

In a moment we will look at an easy way to manage your mileage expenses. But first let’s look at the data required for a claim to be compliant.

HMRC will want to see detailed mileage records that show each and every trip that has been claimed for: the date of the journey, where it started, where it ended, the mileage, the reason for the journey and the addresses visited. Do you have those details on record? For every journey? It’s essential. But the unfortunate truth is that – in the event of an investigation – many businesses wouldn’t have the information required to challenge HMRC. And sadly when it comes to tax investigations you are guilty until proven innocent.

How Movolytics makes it easy

Sounds like a lot of work, doesn’t it? And don’t forget you have to audit your mileage claims too in order to verify their accuracy. There is a simpler way. A method for processing compliant mileage claims without lifting a finger.

Movolytics is a telematics platform that gathers data on every vehicle, every driver and every journey they make. All the information you need to complete mileage claims is automatically collected and stored safely. You can verify drivers’ mileage claims in seconds. In fact the system is so good you no longer need to ask your drivers to complete their own mileage claims.

But how?

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1.- Track journey time

Movolytics logs the start time of each journey, the end time of each journey and time spent on the road.

Claiming mileage: business VS private mileage | Movolytics2.- Track mileage

You can also see exactly how many miles have been travelled each journey, each day, each week and each month – either by driver or by vehicle. No more rounding up to the nearest whole mile, just accurate mileage data you can count on.

3.- Logs addresses visited

Movolytics even logs the addresses of the places your drivers have visited. So you can quickly show that your journeys were for business purposes in the event of an HMRC investigation.

4.- Switch for personal use

The majority of telematics systems rely on the driver determining between business and personal use themselves. Movolytics is different. Essentially we install all vehicles with a switch that allows drivers to flick between business and personal use.

Movolytics then displays reports that make it easy to see exactly how many business miles have been completed in comparison to erroneously claiming mileage expenses for personal journeys. And as an extra failsafe for drivers who forget to flick the switch for personal journeys, you can set Movolytics to send you email or SMS alerts the moment one of your drivers starts the engine outside normal business hours.

5.- Your working world – anytime, anywhere

All the data that Movolytics gathers is sent to the cloud and displayed in neat reports that you can access anytime, anywhere. All you need is an internet connection and your log-in details.

6.- Your data is safe and secure  

The data that Movolytics gathers on your fleet isn’t going anywhere. Cast-iron security and data backup protocols mean you can wave goodbye to storing journey data on paper.

What next?

Want to know a little more about telematics? We wrote a short, jargon-free eBook that spells out exactly how telematics helps SMEs save time, money and hassle. You should read it. (It’s good, we promise.) Won’t you take a look?

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