95% of tax issues around business mileage relate to Benefit in Kind and VAT.
Fuel Benefit in Kind tax (or BIK Fuel) is expensive and inefficient. Even so, around a quarter of company car drivers still receive it. Somewhat perversely, the tax is a more serious problem (potentially) for the drivers who don’t get it, and for their employers.
Why? Because a company car driver is liable to pay it if their employer pays them for ANY private fuel. That makes it vital not only to be able to show careful records of business mileage and reimbursements but also that they’ve been checked. If you couldn’t do that in an HMRC tax audit, your company could find itself facing sanctions.
Fuel VAT. Mileage records can also allow companies to increase the amount of fuel VAT they recover. Most companies reclaim the VAT using the rates set in the HMRC Scale Charges. But if you can show HMRC proof of your fuel input VAT and your fleet’s actual business-private mileage ratio, you can recover VAT proportionally. Obviously you’d do so if it meant getting more VAT back. Cherry picking by vehicle or VAT period isn’t allowed.
Fleets that separate business from private mileage and keep HMRC-compliant records give themselves significant advantages when it comes to tax.
If you have any questions about the tax, we’d love to help. We offer a range of services to maximise tax efficiencies for your business and employees. You can find out more about can we can help here
