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Mileage capture: Company's audit trail was not good enough

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A company was recently hit with a near six-figure tax settlement despite monitoring mileages for its 100-plus car fleet.

“We thought our system was okay,” the company’s fleet manager says. “I had a spreadsheet with private and business mileage separated on it and I had built up a picture for every employee. I knew which drivers did low private mileage because they had a second car.

“I looked at fuel purchase trends and I checked the mpgs to see if they looked right for the car, although that isn’t foolproof.

“I also emailed drivers regularly to remind them to submit their mileages at every purchase with their fuel card.”

Unfortunately, these measures were not enough to satisfy a tax inspector.

The visit found that the company’s mileage logs did not leave a clear audit trail to determine that all of the private fuel had been repaid to the employer.

Of a sample of 28 drivers, only 10 were considered sufficient.

Reasons

The reasons HMRC gave were “poor annotation”, odometer readings were not declared when purchasing fuel at every purchase, the odometer readings were found to be different to what was shown on the fuel card statements and mileages were rounded.

One issue the inspector highlighted was that although hotel receipts were stapled to the mileage expense claims the details were not included on the front sheet.

A driver who said he never used the car for private use was filling up his company car on a Sunday, which counts as a private journey.

The proportion of records that had failed was extrapolated across the car fleet and went back four years.

This left the company facing a six-figure tax liability but, like most companies, it decided not to seek settlement from the employees.

“They had followed the expense system,” the fleet manager says. “It was our expense system so we have to take some portion of the blame.”

HMRC suggested staff should annotate the logs to incorporate postcodes and the company should then do regular spot checks using a route planner.

The company decided to put an automated mileage capture system in place and opted for mileage audit firm The Miles Consultancy (TMC) as its service is HMRC compliant.

Settlement halved

TMC also helped the company to negotiate with HMRC, getting the penalty almost halved.

“Our reps use a software system which shows which customers they are visiting and includes postcodes so we were able to argue that we did have the records but they were separate from our expense system,” the fleet manager says.

Driver interviews revealed that there were no set appointment times and they sometimes had to visit a company twice to secure an appointment, which increased mileage.

  • Performing a mileage audit - click here
  • Are your mileage records satisfactory? Click here

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