A client was recently subject of a PAYE inspection and despite this appearing to be an inspection of the payroll, HMRC are actually looking deeper into the company affairs to extract additional tax if possible. One of the key areas they are targeting is proving the mileage, and this may apply to the following classes of car user:
- Company car drivers claiming no private fuel
- Company van users declaring no benefit as there is no private use
- Personal car users claiming a mileage allowance
Failure to keep complete records in all of these situations could result in additional tax bills not to mention penalties. If there is no proof that all mileage is for business then respectively:
- the company car driver could be subject to an additional benefit in kind charge, and the company to class 1A contibutions thereon
- the van driver could be charged a benefit of £3000, and an additional £564 for fuel if that is provided too
- the employee could be taxed on any additional income under PAYE
The record keeping does not have to be complicated, all that is required is details of the journeys made, a number could be consolidated if on the same day to reduce the volume:
- Date
- Where to journey is to and the reason for the journey – a client/customer name would suffice for this if there were a meeting at their premises
- The mileage claimed – HMRC will allow extra mileage if you got lost on the way
- While commuting to regular place of work is not allowable, if visiting a client en route, the full distance is allowed
- These can easily be maintained on a spreadsheet which also makes it easy to add up
Areas HMRC will look at are:
- confirming no commuting mileage is included
- there are no round sum mileages being claimed (ie rounded up to nearest 5/10 miles)
- spot checks on mileage – they will use internet mapping programs to confirm claims
Please feel free to browse related articles on company vans, recent travel case law, classic company cars, company cars and green company cars
While at first this might appear quite time consuming and onerous, the costs of not complying are significant running to £100s or £1000s for each employee. This article provides information of the main factors but may not wholly apply to your situation so you should seek professional advice before taking any steps based on the contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”