Analysed: HMRC Business vs Private Mileage Recording

As an employer with a fleet of drivers, you have an obligation to cover the costs of business travel for your employees. But you may also have an obligation to HMRC. HMRC is stringent with mileage recording and it is a topic it is increasingly focused on. As such, it is prepared to levy high fines for inaccurate recording.

A survey by YouGov found that 56 per cent of company car drivers are unaware of HMRC rules on reclaiming business mileage. It may seem straight-forward enough, but the lines between business and private journeys can often become blurred. Here are our recommendations on how to accurately record mileage to help prevent you being fined.

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What is classed as a business business mileage?

Before we go through the process of keeping accurate records, it is important to know what is classed as a business journey and what is not. According to HMRC, here are the following types of journeys that are classed as business mileage:

  1. Travelling to appointments, such as those taken by meter readers or sales people
  2. Travelling to temporary workplaces, such as a surveyor or an auditor
  3. Travel where attendance is necessary is also covered, for example, if an employee is temporarily transferred to another branch of the business

What are the conditions for a business journey?

However, it is not as cut and dried as this. If you travel to the same location regularly for more than two years then it is no longer considered a temporary arrangement and will not be eligible for inclusion in the mileage allowance. The same also applies if 40 per cent or more of an employee’s working week is spent at a second location.

The requirements and rules for business mileage reimbursement (AMAP) differ according to ownership types. If the car is owned by the employee then you (as the employer) can pay them an agreed allowance designed to cover fuel, insurance, servicing and maintenance. These payments are tax-exempt and do not need to be reported to HMRC. Having said that, you must still keep accurate mileage records to ensure that you can prove you are not receiving tax relief illegally.

In this scenario, employers can pay a set amount, or up to 45p per mile tax-free, for the first 10,000 business miles and 25p per business mile. If an employer pays a set amount below the approved AMAP rate then the employee can claim the difference between the set amount and the AMAP rate tax free via his or her tax return from HRMC. There is also a supplement of 5p per mile if the car is shared between colleagues.

If the car is company-owned, employers can view the Advisory Fuel Rates published online by HMRC to determine how much to reimburse employees for fuel when travelling for business, this is dependent on engine size and fuel type. Alternatively, fuel cards allow you to be more stringent with fuel purchasing and also give you access to online reporting tools that allow you to monitor exactly how much fuel is being used.

What is classed as a private journey?

As mentioned above, temporary workplaces that become permanent can no longer be included in the mileage allowance. Other examples of private journeys include:

  • Ordinary commuting between a permanent workplace and home
  • Any private journeys that do not involve a workplace

Unlike with business journeys, there are no real exceptions here. A commute to and from work cannot become a business journey, even if an appointment has been arranged on the way for convenience.

 

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How to keep accurate records

The easiest way to remain compliant and avoid fines is to keep accurate and provable records. You can do this by using an electronic mileage logbook, like  WEBFLEET logbook. Your log should include the following (for every business journey):

  • The purpose of your trip
  • The date
  • The start and end locations
  • The company or client you visited
  • And of course, the miles driven

Doing all of this by hand is very time-consuming and often results in discrepancies, so we recommend using an electronic method. With TomTom’s WEBFLEET logbook, all of your drivers’ trips are automatically recorded and tracked. The driver simply selects the trip’s purpose and enters the clients’ details. Once the details are entered, they are saved to the system so they can be easily selected at a later date.

The electronic logbook presents drivers with a detailed route map of each trip and even sends mileage reports to a chosen email address. This allows you to accurately determine your fleet’s mileage and expenses, and to keep a safe record of this to help you demonstrate compliance with HMRC regulations.

Using an electronic logbook could even help generate cost savings for you and your employees. More efficient monitoring means you’re only reimbursing actual business miles, and your employees will also benefit from a reduced administration burden.

5 top tips

  • Be aware of regular journeys as these could become taxable
  • Use an electronic method for mileage capture
  • Monitor fuel card expenditure
  • Flag up discrepancies fast
  • Ensure you have issued clear guidance to employees on your vehicle use policy and mileage reclaim policy

Managing a fleet can be a significant and, at times, overwhelming task. For more information, download the free guide to learn how companies are cutting costs and saving time by digitising the workflow.

 

*This blog post provides general information on tax regulations applicable in the UK. Its contents can be used for reference only. TomTom Telematics does not warrant or imply that the use of this text or its products or services can in itself guarantee compliance with your tax or legal obligations. To ensure compliance with these obligations you must always seek individual advice from a legal counsel or a qualified tax compliance specialist.

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