How to avoid confusion in business mileage reporting
The first thing to do is to make sure that you understand the rules fully. There are plenty of rules but they aren’t complex and as long as you are methodical about employing them (or have a great expenses system that does it automatically) then you’ll be fine.
Once you have a clear understanding of the rules and how they relate to your business then write up a clear and referenceable company vehicle expenses policy and make sure you distribute it. After all, there’s no point in having rules if you don’t tell people what they are.
Managing employees with personal vehicle
Where employees use their own vehicle it is expected that employers will make good any costs incurred. HMRC make this simple by using a standard value for each mile and if you stay at or under that amount then there is no tax or NIC to pay.
Make sure to clearly set out exactly what you mean by ‘business-related travel’ to avoid confusion. The easiest way to define it is travelling to a location other than your normal place of work, for work. So, this would usually apply to things like client meetings, working in a different office or other company-related travel like attending events or exhibitions.
HMRC offers clear guidance on Mileage Allowance Payments, setting out the amount you can pay up to without having to let HMRC know.
They’re designed to cover the cost of fuel, as well as wear and tear on your car. Most firms will follow this as standard practice but it’s worth knowing you can actually set the mileage figure at whatever you want but there are tax implications for offering less or more than HMRC’s recommendations.
Here are HMRC’s suggested figures at a glance (you can see them in full here):
|
Vehicle type |
First 10,000 miles |
Every mile after 10,000 miles |
|
Car/van |
45p |
25p |
|
Motorcycle |
24p |
24p |
|
Bike |
20p |
20p |
Thinking of offering your staff more than the Mileage Allowance Payments rates? You need to remember that any amount that goes above the suggested rates is taxable and will need to be reported to HMRC via a P11D form.
If you opt for the reverse and decide you’re going to pay less, then your employee may be able to claim income tax relief for the shortfall. They’ll need a P87 form to do this.
Managing employees with a company car
For employees who use a company vehicle only for company business then it is a simple matter of either reimbursing the costs of putting fuel in the vehicle or supplying a fuel card for them to use. This scenario is most likely where the vehicle is kept at the business premises or where it is a van or other commercial vehicle. It’s a very different matter if your employee is making business trips but also does some personal mileage using a company car.
The cost of business mileage is not taxable and can be claimed against corporation tax but personal mileage presents different issues.
If you decide that you’re going to pay for all fuel for company cars, then anyone who has one will have to pay fuel benefit tax. This is based on a fixed fuel benefit, which is multiplied by the employee’s salary tax band and the car’s ‘benefit-in-kind’ percentage.
If your employee has a company car and pays for their own fuel, then you need to outline fuel costs based on business mileage in your expenses policy. Again, HMRC provides handy guidance on this via the Advisory Fuel Rates.
These are guidelines based on current fuel costs and are revised quarterly, taking into account the efficiency of the vehicle, road conditions and other seasonal factors.
Encouraging car share
The costs of company cars and mileage are one of the biggest that we see in the data on expenses claims and for businesses that want to make a contribution to cleaning up the atmosphere and reduce costs, it is an area that is worth exploring.
Rather than giving employees individual cars, it is worth considering instituting a pool car system where the cars are kept at the company’s premises overnight. This will remove the tax burden on the employees and remove the need to report personal mileage.
There can’t be many companies that haven’t had the parking space arguments and when you have your pool cars in place, one of the best ways of alleviating this is to encourage car sharing.
Car sharing is good for the environment and helps to foster a more collegiate way of working and of course, you need fewer parking spaces!
You can encourage car sharing by;
- Designated parking - give your car sharers guaranteed spots in the company car park and make sure they are the best!
- Free car share parking - if you don’t have a company car park then buy slots at a local facility and give them to your sharers
- Guarantee a ride home - guarantee people a taxi if they have a family emergency or have to work late
- Monthly draw - hold a monthly prize draw for everyone who has shared a ride that month
- Thank you gifts - give thank you gifts for when people start up and on their anniversary
- C-suite adoption - get the execs to show the way
- Car share champions - celebrate car share champions, people who share the most, for the most miles and the most times
- A league table - people love a competition so have a league table by department and get their competitive streaks going
- Internal marketing - make sure you let people know and give them plenty of reasons to join in
- Co-shares - if you don’t have many people or you find there are people that don’t live near each other then why not team up with nearby businesses?
Green options
The UK is leading Europe in the adoption of green travel alternatives and there are a number of things you can do to help your employees travel in a more sustainable way.
As Shaun Sadlier, Head of the Arval Mobility Observatory in the UK, said:“Reducing air pollution is a major consideration for British businesses when they are making vehicle choices, whether they are selecting cars or LCVs, and of course there is also the ability to save money on fuel as 55% of businesses had also taken into account when choosing electrified cars.”
Electric vehicles are the way to go and with internal combustion engines being all but banned from 2030, forward-thinking employers are looking at ways to get ahead of the curve.
The good news is that providing electric charging points at work is not a taxable benefit and doesn’t have to be reported. By the same token, companies can install an electric charging point at company car users’ homes again with no tax implications.
If you have a large number of people making short journeys then why not introduce a company ‘pool bike’ scheme. The UK is investing £2bn in a bike route revolution that will make cycling more convenient and safer and for companies, this is a winner.
Use automation to manage mileage expenses
If you have to deal with mileage then make it easy on yourself.
It has to be said that whilst it is really important to stay on the right side of the law, reporting mileage claims isn’t really a value-add activity.It makes sense then to minimise the stress and effort that it takes and the best way to do this is to have an excellent expenses system that handles the process for you.
Access Expense is designed specifically to reduce manual tasks like mileage, making it easy for employees to claim and finance teams to process expenses claims.
Employees can claim corporate travel expenses when they’re out and about – whether from the train, in the airport lounge or on the road, and they can scan receipts easily with no need to track mileage manually.
While approvers can sign off accurate claims with confidence and knowing that the right rate will be applied even if the distance exceeds the HMRC mileage threshold. Staying compliant with HMRC requirements is made easy with inbuilt tax tools for company cars and business travel expenses.