Calculating private and business mileage

Telematics is an accurate way to capture mileage accurately and allows companies to track private as well as business mileage.

Many systems have a button which drivers can press for private journeys so the number of miles are recorded but not the route.

Companies can also use fleet software to record mileages either integrating with the expense system or as a separate module. For instance, Jaama offers a mileage capture service as part of its Electronic Driver Services (EDS) module.

The systems check how much fuel has been used against miles driven and vehicle taken capacity to prevent fraud.

Online mileage capture systems are also available from companies like TMC, Midas and Vertivia, or from fuel card companies, leasing and fleet management companies.

Although the HMRC doesn’t require postcodes it is considered good practice and these systems typically work by drivers logging in, verifying their vehicle’s details, entering ‘from’ and ‘to’ postcodes and the reason for the journey.

Drivers also record their odometer reading which enables the system to calculate private mileage and the driver to reimburse the company for their private mileage if they are using a fuel card.

Text message or email reminders are sent to drivers.

Failure to submit mileages could mean all mileage is treated as private and the full amount is deducted from a driver’s salary.

Systems typically cost £1 per driver per month depending on the level of service and reporting required.

Savings from accurately recording mileage

Companies that introduce a mileage capture system can expect to reduce their mileage by a quarter, according to Jackson.

Fuel savings can also be achieved by moving from paying AFRs (Advisory Fuel Rates) to an exact pence per mile.

Heinz UK and Ireland saw its mileage claims fall by 28% and reduced its pence per mile rate by 10% by introducing Vertivia’s system.

A Midas customer that was paying AFR rates discovered its fleet’s actual pence per mile was 10.6.

Moving to actual pence per mile also gives employees the incentive to drive more efficiently.

Some providers will audit records and contact drivers if mileages do not appear accurate or the company can handle this in-house.

“A line manager could take one in every 10 claims and check the mileage using an online route planner,” Rawlings says.

“Line managers in different parts of the business may have different attitudes so you will get inconsistencies in reporting unless there is a company-wide policy.”

It’s important to follow up inaccurate mileages – if you have the data you must use it.

“A company had a spreadsheet of mileages and audited it but the problem was they then didn’t do anything when they found inaccurate claims,” Jackson says. “They were fined £700,000.”

Davies adds: “If you find inaccuracies you should get the individual to resubmit their mileages and make a further reimbursement to the company.

"That can be done at any point during the tax year.”

Some companies are taking a tough approach to ensure drivers submit postcodes.

One of Davies’ clients has warned drivers that if they don’t comply the company will enter the fuel benefit on the P11D and the driver will have to contest it with HMRC.

Driver education

Educating drivers what is and what isn’t a business mile is important too.

“Drivers need to understand the difference between a permanent and temporary workplace,” Davies says.

“I see frequent examples of drivers thinking they have a travelling appointment when actually they are travelling to a permanent workplace.”

Journeys to temporary locations, such as building sites, are considered business mileage but only if the site is used for less than two years.

“As soon as the company or driver knows that they will be attending that site for more than two years it becomes a permanent workplace,” adds Davies.

Pentland cuts fuel by 16%

Pentland Brands is anticipating a six-figure saving over 12 months thanks to TMC’s mileage capture system.

The system went live in January, following three months of testing, and already the firm has seen a 16% improvement in fuel consumption across the 200-strong car fleet.

“Drivers are taking an interest in mpg and are now mindful of where they fill up,” fleet manager Steve Osborne says.

Financial savings are also being achieved by drivers no longer receiving the P11D free fuel benefit.

Using the mileage capture system all private mileage is now deducted from drivers.

However, if the private mileage deduction is greater than the tax liability which the employee would previously have paid (when they received free fuel) the company makes a supplementary payment.

“There’s zero impact on the driver but we are saving on National Insurance,” Osborne explains.

“The mileage capture system also allows us to claim back VAT on the business element of mileage in a driver’s own vehicle, pool car or hire car.”

Implementing the system took six months, taking into account the added complexity of removing free fuel.

During that time the company collected three months’ worth of data, carried out tests, created FAQ documents and held workshops with drivers.

Vans

Unlike cars, company vans can be used for commuting without incurring tax.

HMRC also allows ‘insignificant’ private use such as a detour to drop children at school on the way to work or using the vehicle to take large household rubbish away occasionally.

However, using the van to go on holiday or for regular trips to the supermarket would not be considered ‘insignificant’.

Companies should keep mileage records and get employees to sign an agreement about the use of the van.

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