Mileage Expenses & HMRC Compliance

6/16/2014

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WWW.PEAKMILES.COM MILEAGE RISK REDUCTION

CONSIDERING MILEAGE EXPENSES FROM A RISK PERSPECTIVE A PRESENTATION: CONSIDERING MILEAGE EXPENSES FROM A PERSPECTIVE OF RISK ASSESSMENT, RISK ANALYSIS AND RISK PREVENTION Based on UK Legislation and Experience By Alex Baker – Fleet Innovations

RISK IN MILEAGE UNCOVERING THE RISK QUANTIFYING THE RISK THE LETTER THE HARD WORK BEGINS THE LEGISLATION PREVENTING RISK RISK RATING

6/16/2014 WWW.PEAKMILES.COM MILEAGE RISK REDUCTION

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MILEAGE EXPENSES WHERE IS THE RISK?


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• 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 company could pay penalties 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 MILEAGE RISK


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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.”

http://www.peakmiles.com/

THE COST QUANTIFYING THE RISK

THE TAX OWED (PLUS INTEREST)


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• 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 stating the problem and outlining what is owed.

THE HARD WORK WHAT'S HIDDEN IN THE WOODWORK?


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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 ANYTHING NEW


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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 MANAGING HMRC


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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… [email protected] www.fleetinnovations.com www.peakmiles.com


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http://www.fleetinnovations.com/


Mileage Expenses & HMRC Compliance

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Transcript of Mileage Expenses & HMRC Compliance