HMRC is clamping down on mileage fraud.
It has already issued several fines of thousands of pounds for overstated business mileage by employees. One company is currently appealing against a settlement in excess of £4 million.
All companies are required by law to keep mileage records to show how their vehicles are being used.
If a company does not provide free fuel for private use to company car drivers its records must prove it.
This requires drivers to record ‘to’ and ‘from’ locations, the reason for the journey and the number of miles travelled.
“It’s common for companies to have inaccurate mileages,” says David Rawlings, director of BCF Wessex Consultants. “Many are either capturing mileage badly or not at all.”
Any company that is not keeping accurate mileage records risks being slapped with a huge tax bill.
And it’s a common issue: almost every record HMRC has checked over the past 12-18 months has contained inaccuracies.
At that point the company is “guilty until proven innocent”, according to Paul Jackson, managing director of mileage audit firm The Miles Consultancy (TMC).
Often the inaccuracy is down to just one incorrect claim on a checklist of 10 records.
“Most companies won’t challenge because when they check it they discover the situation is worse than that,” Jackson adds.
More than a fifth (22%) of drivers admitted to exaggerating mileage claims in a survey last year by employee expense management company GlobalExpense.
Rawlings has witnessed drivers openly admitting to “fiddling the mileage”. “They don’t see it as theft,” he says.
“They see it as being a bit creative, but from the company’s point of view it’s the same as the driver sticking their hand in the till.”
The level of inaccuracy can run into thousands of miles. TMC discovered one company last year with 750 drivers where the mileage did not match the fuel spend over three years.
The fuel spend suggested the average odometer reading should have been 117,000 miles over three years, but the average was 74,000.
As the inspector has the power to go back six years this could leave a company with a hefty sum to settle.
HMRC aims to visit companies every six years, but experts say it is stepping up this activity, starting with the larger organisations, by putting more resource into line-by-line detailed checking of records. The fines make the time and effort worthwhile.
According to Nick Davies, senior consultant – employer solutions at chartered accountants Barber Harrison & Platt, companies who return a company car benefit on a P11D and do not return a fuel benefit are more likely to be visited as it is seen as a potential risk.
John Pout, head of sales – card at Arval, points to car sharing as an opportunity for fraud if both drivers claim the full mileage.
“The Government is looking to make use of its powers and make sure that companies comply,” he says.
Jackson agrees: “Investigators see the whole area of mileage as low-hanging fruit in the current climate.”
An HMRC spokesman denies there is “a specific crackdown on company cars or vans” but adds: “Where HMRC have reason to believe that someone is seeking to reduce their tax liabilities that are rightly due, HMRC will always take action to ensure the rules are adhered to.”
A spreadsheet-based approach is the bare minimum for capturing mileage, according to Rawlings.
Caroline Sandall, fleet manager at Barclays, uses an Access database with information fed in from the company’s expense system.
“It allows us to run a number of different reports,” she says. “For instance, we can see if people in private cars are doing lots of miles or if cash allowance drivers are. If any anomalies are flagged up we write to the employee.”