Mileage Expenses & HMRC Compliance

6/16/2014
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WWW.PEAKMILES.COM MILEAGERISKREDUCTION
CONSIDERINGMILEAGE EXPENSES
FROM A RISK PERSPECTIVE
A PRESENTATION: CONSIDERING MILEAGE EXPENSES FROM A PERSPECTIVE OF RISK
ASSESSMENT, RISKANALYSIS AND RISK PREVENTION
Based on UK Legislation and Experience
By Alex Baker– Fleet Innovations

RISK IN MILEAGE
UNCOVERING THE RISK
QUANTIFYINGTHE RISK
THE LETTER
THE HARD WORK BEGINS
THE LEGISLATION
PREVENTINGRISK
RISK RATING
6/16/2014 WWW.PEAKMILES.COM MILEAGERISKREDUCTION
2

MILEAGE EXPENSES
WHERE IS THE RISK?
3
• Mileage is generally tax free
• Mileage overpaid is seen as a tax free
payment
• Mileage overestimation is fraud
• Employer and Employee are responsible
• Tax, interest and penalty may be charged
THE MILEAGE BEING CLAIMED
A companycould
paypenalties to
HMRC for both
inaccuracy and
poor record
keeping
• HMRC need to be able to properly audit
mileage records.
• If records are inadequate then HMRC map
charge a penalty
• Penalty could be up to £3000 per driver
BUSINESS RECORD CHECKS

HIDE AND SEEK
WHERE TO FIND MILEAGERISK
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OVER-ESTIMATION PHANTOM TRIPS
LACK OF SUPPORTING
DOCUMENTATION
“I add a little mileage to each
journey no one ever checks”
POOR QUALITY RECORD
KEEPING
LACK OF DUE CARE AND
ATTENTION
CULTURE AND INFORMAL
POLICIES
“I make up trips that never
happened to reduce my
personal mileage bill, I also
make them up on the sales
report”
“I just put the total business and
total private mileage for the
month, no one has ever asked
me to prove this… If they did ask
I couldn’t prove it”
“I did 20,000 miles this year, I
just put down 10,000 for
business. That seems about
right?!”
“I just realised I have been
claiming 20p per mile and the
actual rate should have been
12p. Oh well no one will
notice”
“my boss could not give me a
pay rise this year, we both
agreed I would take the
difference in mileage, it’s the
same for the rest of the team.”

THE COST
QUANTIFYINGTHE RISK
THE TAX OWED (PLUS INTEREST)
5
• HMRC will want their tax which normally is
made up from national insurance / income tax.
• They will normally look back 4 years but will go
back 6 years if they find enough reason.
• With proven fraud HMRC may go back beyond
6 years
• Interest will need to be paid
PENALTIES AND FINES
• Penalties are very likely
• Ranging from 15% to 100% of the tax
• Further penalties for poor records can be
levied
• If fraud is found then expect to pay higher
penalties
1 0 c a r s i n D u d l e y
= £ 1 2 8 , 0 0 0
1 c a r s i n 1 d r i v e r
= £ 3 4 , 0 0 0
1 0 0 0 c a r s i n p h a r m a c e u t i c a l
= £ 1 0 m i l l i o n
3 0 0 c a r s i n p h a r m a
= £ 4 m i l l i o n

HMRC CORRESPONDENCE
THE LETTER
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• You may receive a letter or may be told in
advance depending upon your relationship
with HMRC
• The letter will outline what HMRC believe is
the issue
• HMRC will outline the level of the payment
they are expecting and will draw your
attention to interest as well as potential
penalties
• Its now up to you to prove the error if one
has been made or to hurry up and pay
• Guilty until proven innocent
• Your interaction with HMRC will effect the
final penalty payment
You will
receive a letter
statingthe
problem and
outlining what
is owed.

THE HARD WORK
WHAT'S HIDDEN IN THE WOODWORK?
7
Driver Dissent
Drivers can see the
whole exercise as
trust issue and
can rebel. The
most honest
drivers can take it
particularly hard
as it can seem very
accusative.
Be prepared for
some surprises
Dig Deep
If you dig too deep
be wary of what
you might find. If
you find fraud the
penalty could be
much higher and
the payment far
greater.
Is it possible
Make a judgment
call it may be
easier to hold you
hands up and
negotiate rather
than spend
months looking for
data that does not
exist.
Be Helpful
Minimise your
penalty by being
helpful and
assisting HMRC.
They are far more
likely to be lenient
if you hold your
hands up rather
than wasting their
time and being
evasive.

LEGISLATION
IS THERE ANYTHINGNEW
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• The legislation is not new it has been
around for years
• HMRC are now being less lenient than
it may have been in the past
• HMRC are strongly enforcing
legislation
• Mileage may be a simple route into
other areas of the business
• Remember HMRC have greater powers
in many cases than the police.
• Mileage claims are high on the agenda
for certain departments in HMRC
No new
legislation
its just
being more
strongly
enforced

RISK RATING
MANAGINGHMRC
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• If you or your business is
subject to a compliance issue
or a penalty then it can cause
future problems.
• HMRC have an internal risk
rating and this kind of activity
can damage that rating.
• A damaged rating can open
up problems meaning further
investigations are more likely.
PENALTIES AND COMPLIANCE
ISSUES CAN EFFECT YOUR
HMRC RISK RATING.
Low Medium High Highest

RISK
HOW TO PREVENT IT
NEW COMPLIANT POLICY
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COMPLIANT SYSTEM REGULAR REVIEW
• Improve your
mileage expenses
process and make
sure it is well
documented.
• Ensure that all
claimants have read
the policy and sign
up to it.
• Make sure managers
and stakeholders
understand the
policy and enforce it.
• Implement an HMRC
compliant system
• We recommend
PEAK.
www.peakmiles.com
• Check it meets all
the legislation
requirements
• Things change…its
one of the main
reasons polices and
companies become
non compliant.
• Regularly check
changes to
legislation to see if
anything has
changed and adjust
policies accordingly

THANKS FOR
TAKING THE TIME…
info@fleetinnovations.com
www.fleetinnovations.com
www.peakmiles.com
11

Mileage Expenses & HMRC Compliance

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