Ideally I like to see business mileage claims set out, sometimes even neatly, showing date, destination, visiting whom, number of miles, the rate of claim and the amount claimed.
I have a limited company client. The director has made a claim stating for the period 'all mileage is business' and providing me with the starting and closing odometer readings.
As an agent for HMRC (oops, I mean the client) I am uncomfortable with this. Would it be acceptable to you?
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Possible?
The question you need to ask is, is it actually possible?
Do they have another vehicle they can use privately? Does the total mileage seem reasonable for the business? Basically, do you have any reason to disbelieve the client's assertion beyond gut feeling? If not then, as their agent, it would be wrong to exclude an apparently legitimate expense. You know the position if you don't think their claim stacks up.
But I would make clear, in writing, that HMRC are likely to take a different view if enquired. Point out that, without any sort of breakdown, it will be hard to defend an assertion by HMRC that the total includes some private mileage. Possibly hint at the fact that a lack of support in this area might cause HMRC to think they are on to a winner with any enquiry so all their records could get subject to special scrutiny. They may stick to the assertion for this year, but would hopefully be convinced to do better in future if this is legitimate.
Letter of Representation
It's not entirely beyond the realms of possibility, but I would want to provide evidence that I had challenged what the client had said. I would then make a detailed statement in a Letter of Representation and get the client to sign it before filing any accounts.
Old trick
Does he live over the shop? Or have a separate place of work? If you happen to go and see him one morning, and the vehicle is parked there, feel the bonnet. If it's warm, ask where it's been that morning.
The other obvious question is whether he has another, 'exclusively private' vehicle.
And lastly, if it's true that all mileage on the vehcile is business, would it be more efficient to have the company own the car and prohibit any private use?
You clearly are not an agent for HMRC, but you nevertheless act effectively as intermediary and ensure fair play on both sides. Besides that, you perform a significant service to the client by askling the questions HMRC will ask, but before they get the chance.
I'm trying to...
Does he live over the shop? Or have a separate place of work? If you happen to go and see him one morning, and the vehicle is parked there, feel the bonnet. If it's warm, ask where it's been that morning.
The other obvious question is whether he has another, 'exclusively private' vehicle.
And lastly, if it's true that all mileage on the vehcile is business, would it be more efficient to have the company own the car and prohibit any private use?
You clearly are not an agent for HMRC, but you nevertheless act effectively as intermediary and ensure fair play on both sides. Besides that, you perform a significant service to the client by askling the questions HMRC will ask, but before they get the chance.
I’m trying to decide if you’re serious or not with this part.
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is the issue the avoidance of the fuel BIK charge on a company car? if so, I would mention that any private use (unless it was extremely incidental) is likely to be fatal and unless he can prove otherwise he may find himself in a tricky position. He should keep detailed records to assist with any future argument by HMRC and if doesn't want to then that's up to him. The courts put the onus on the taxpayer to prove the facts, not HMRC.
not 100%
If he doesn't have access to a second vehicle, then there's no way I'd accept 100%. However, I could easily be persuaded of 100% if he did have access to a second vehicle.
If 100%, then you may be stuck with a pool that never gets down to nil.
MOT
I would at least want sight of the last two years MOT to check mileage and ideally a comprehensive mileage log.
Last two MOT certs and check the mileage declared between the two would at least give you a rough estimate.
There has to be some kind of substantiation of the figures.
Difficult one, but.....
What I do, purely because it works for me, is send out a Q&A with instructions to answer Qs and then date and sign the form before returning to me. Then, if I get some replies which look out of kilter, I send another Q&A with more detailed specific Qs about the problem areas, plus some background tax info on why I want more info, again with instructions to sign and date the Q&A before returning to me (after having answered Qs, or course) ... this gives me at least two bites at the cherry, and two client signatures to what they claim is the case ... which I think leaves me in the clear, but, just as importantly, gives good notice to my client that I think there might be a problem, and why....... one of my clients calls these the "idiot sheets", but they do seem to make people think twice about potential grey areas.