They will look at whether there is enough detail about the purpose of the journey and who was visited, whether any mileage has been claimed that appears to be a private journey (a home to work journey for a company car driver, for example) and whether drivers appear to be routinely rounding mileages.
Davies advises companies to also be aware of the HMRC’s view on permanent and temporary workplaces.
“If a driver is visiting the same location very frequently, perhaps a branch office, it may have become a permanent workplace, and therefore a private journey, without either the driver or the employer realising,” he says.
The inspector will usually assess whether employee mileage claims are accurate by taking a random sample of employees and checking their journeys using a route planner.
A 10% leeway is allowed but if the mileage the employee has claimed for is greater the inspector will decide that the private fuel benefit should apply.
If two records out of a sample of 10 employees are considered inaccurate, the inspector will multiply that across the rest of the fleet and 20% of the vehicles will be deemed non-compliant, according to Jackson.
The inspector will seek to claim the tax on fuel benefit as well as Class 1A NIC, interest and penalties. Typically, they will go back four years although they have the power to claim for six years.
Don’t be afraid to appeal
“Nine times out of 10 companies take the rap and look to improve procedures,” Jackson says. “Many companies are too scared to appeal but they shouldn’t be.”
Davies agrees: “All is not necessarily lost, although it can be difficult to overturn the decision.”
The company will need to be confident that employees haven’t been overstating their business mileage.
“You need to ask yourself whether what the Revenue has found is typical,” Jackson says. “You may have been lucky that only two out of 10 employee records failed –perhaps it could have been four out of 10.”
On receipt of the decision the employer has 30 days to appeal. Chater says the deadline can be extended but you will need to provide a good reason.
It could take several months for a final settlement to be reached.
Appealing can be heavy on resources as extra information will need to be collected to prove that despite the inadequacy of the records no private fuel has been provided.
It is advisable to seek professional help in building the case.
“Start by looking at what has been put down and speaking to the drivers,” Jackson says. “Perhaps the motorway was closed and they took a different route.”
It may not be possible to speak to some employees because they have left the company and the remaining employees may have trouble remembering a journey if it was some time ago.
Building the case will probably involve trawling through the drivers’ diaries and any other available records such as worksheets.
Another option may be to record accurate mileages for the next three months and then extrapolate the mileage over a year in the hope that the figure will exceed the mileage that had been declared.
In this instance it will also be necessary to convince HMRC that there haven’t been any significant changes to mileage patterns compared to the previous years.
“Make sure you have as much evidence as possible on your first appeal visit or they may ask for more information,” Jackson says.
“Each time they ask for something extra it may take them a month to come back to you.”
It is also worth demonstrating what procedures you have put in place to prevent any inaccurate claims in the future.
“HMRC will then let you know if what you have now provided changes their decision or why it does not,” Chater says.
“If you remain unsatisfied you can ask for your case to have a separate review by a different officer or have your case heard by an independent tax tribunal.”
But, as Davies points out: “The moral of the story is to ensure that mileage records are accurate in the first place.”