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Estimated expenses

Am I overthinking?

Didn't find your answer?

I've recently moved back into practice so I might be nitpicking.

Client has put through a clear estimate for mileage in the company records, the opposite entry to an overdrawn loan account.

My questions: would you insist on a proper expense claim? In industry I would never put through estimates.

Second, is this allowable for tax. I didn't think so, but I've been overruled.

Just wanting to check if it's me "overegging" and worrying unnecessarily.

Replies (27)

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Bramble
By Chris.Mann
12th Nov 2019 08:11

The first question I'd be asking - "do you have a mileage log, maintained on a regular basis"?

Whilst I doubt that there will be, at least it gives your client the opportunity to produce one, or accept the consequences.

No, you're not nitpicking. You're doing your job. Your client should respect that.

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Scalloway Castle
By scalloway
12th Nov 2019 08:16

I would insist on a proper mileage log.

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Replying to scalloway:
RLI
By lionofludesch
12th Nov 2019 09:45

scalloway wrote:

I would insist on a proper mileage log.

The snag with insisting on a proper mileage log is - what if he hasn't got one ?

No motor expenses allowable ? All motor expenses allowable ?

To be brutally honest, I can only think of a couple of occasions where HMRC have challenged any private addbacks - including the days when we had proper enquiries on a regular basis, pre 1997. It's just not a winner based on a reward v effort calculation.

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By SteLacca
12th Nov 2019 08:48

As for your second question, there isn't enough information. What is the mileage for? If private, has a corresponding benefit in kind been recorded?

If business, does it meet the W&E test?

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By SXGuy
12th Nov 2019 08:51

Are you sure its an estimate, and not Mileage Allowance? Obviously needs a mileage log to back this up, but I think you may be ignoring the obvious. As this would probably be allocated to the DLA

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By JDBENJAMIN
12th Nov 2019 09:44

If the client has not kept a mileage log (and I have never seen a client do so), what can you do but use their estimate? If they cannot justify it to HMRC if queried, then they must accept the consequences. To cover yourself, tell the client to keep a log in future. They will ignore that advice, but they won't be able to say you didn't warn them. If it is all business mileage, then it is fully allowable for tax.

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By meadowsaw227
12th Nov 2019 09:53

I would e:mail the client and tell them that they will need the full detailed mileage log as and when HMRC ask for it.
CYA

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By Roland195
12th Nov 2019 09:59

It depends on the working practices of the firm. I for instance, wouldn't accept 10,000 miles but I would be prepared to include a reconstructed log from a diary/RAC Route Planner particularly if this is the client's first year.

If the client genuinely does incur business mileage, there is an argument that it would be just as wrong to omit from the accounts entirely.

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By ireallyshouldknowthisbut
12th Nov 2019 10:00

Surely you should talk to the client?

To establish (a) if there is a business purposes (b) if the estimates are reasonable (c) to explain how to do it properly.

You cant sit there in a bubble.

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Hallerud at Easter
By DJKL
12th Nov 2019 10:05

Just to slightly relax on the mileage log, where client has fairly regular trips (especially longer ones) where they say visit one of their clients x times a year, and I can check the x times to their detailed billing to said client (invoices to client detail dates of visits) I would likely be more relaxed about not having a log written in real time.

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By Sandnickel
12th Nov 2019 12:10

Thanks for all the replies.

The client has been in business for a number of years and usually produces a list of the mileage that he has done (from diary appointments). I would have been happy with this. The client has not done so because they are "too busy" and has simply picked a figure based on previous years amounts.

I'm uncomfortable with this for a few reasons but the fact that it reduces the amount of money in the DLA is the one that's bugging me. It's a fictional credit reducing amounts owed to the company.

With regards to the CT, I remembered being challenged over estimated mileage many years ago by a member of our tax department who added it back in the comp, saying it was a round sum allowance. She was a former tax inspector though so maybe overzealous. So, if the client is saying it's business mileage then it is allowable?

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Replying to Sandnickel:
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By Roland195
12th Nov 2019 12:27

So learning point for today is that clients often don't do as advised by their accountants, particularly if it involves effort on their part.

If you are satisfied that the client is genuinely driving a private vehicle when engaged on company business and that the figures are comparable with prior years, the other business records and your own knowledge of the client, I'd suggest you don't have a problem here. Would it make you feel better if the client suddenly produced the log from a drawer he had forgotten?

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Replying to Roland195:
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By Sandnickel
17th Nov 2019 09:02

I didn't realise there were more replies to this. I'm satisfied that I'm not just nitpicking, thank you for the reassurance. Thanks to everyone who took the time to respond.

The CT, I still not convinced over. Logically we could put through anything if we just accept this (I know it's the client but im still uneasy). However, it's out of my hands now so nothing I can do.

Only one condescending reply as well:

Roland195 wrote:

So learning point for today is that clients often don't do as advised by their accountants, particularly if it involves effort on their part.

If you are satisfied that the client is genuinely driving a private vehicle when engaged on company business and that the figures are comparable with prior years, the other business records and your own knowledge of the client, I'd suggest you don't have a problem here. Would it make you feel better if the client suddenly produced the log from a drawer he had forgotten?

To answer your point, if I had evidence on file to support the figures then yes I would feel better. I hope I'm not alone in that. If the client is making up the figures that's up to them but at least I have something to argue with should they get investigated.

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Replying to Sandnickel:
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By SXGuy
12th Nov 2019 12:35

I can see your argument for your client, just picking a number based on last years accounts, but I can not see your argument for reducing the money owed to the company via the DLA. Mileage allowance would do exactly this.

Your only point, would be to seek clarity from your client regarding the mileage.

If its genuine business mileage, then its allowable, and goes to the DLA.

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By NickBiden
13th Nov 2019 12:24

On the subject of maintaining a mileage log there are phone apps, such as Mile IQ, which allow you to track mileage - automatically, no user input. Arguably this means that there is no excuse for NOT having a log. It produces a well formatted monthly report that shows journeys by postcode. Whilst this doesn't guarantee the W&E test will be passed for all journeys claimed it does show a sensible level of proactive record keeping.

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Replying to NickBiden:
RLI
By lionofludesch
13th Nov 2019 12:34

NickBiden wrote:

On the subject of maintaining a mileage log there are phone apps, such as Mile IQ, which allow you to track mileage - automatically, no user input.

Even if you leave your phone on the cornish ?

Nothing's that foolproof ...... whatever the blurb says.

And, as you say yourself, the app won't record the purpose of your journey.

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By David Gordon FCCA
13th Nov 2019 12:45

You are not auditor, so take no responsibility for the accounts, but:
The client is being silly.
What you can do is pick up estimated annual mileage from Service bills and or MOT certificates. Or, read the car's clock.
Then because most fuel will be paid through c-card or bank card, you may pick up fuel cost from the statements. A mathematical exercise will then give you an approximate annual mileage. Knowing your client will give you an estimate for private use.
you may then check whether the client's claim is reasonable, or whether you suggest a more reasonable figure.

The issue is not whether you accept the client's figure. That you may.
The issue is if HMRC happen to pick on your client, for this, they may then decide to look at your other clients.

PS
Train your client to keep a note of mileage

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By AdShawBPR
13th Nov 2019 14:42

The evidence I receive from clients for mileage ranges from a trip by trip analysis to monthly totals. I prefer the former but I can use common sense on the latter. As long is it seems reasonable based upon what I know of the client then I'd have a word about keeping better records and a warning that HMRC could deny the claim without them. Lack of evidence does not mean it did not occur but if I thought they were trying to pull a fast one they wouldn't be a client of mine for much longer. As has been said in an earlier post, debit P&L expense and credit DLA.

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By chrisowen
14th Nov 2019 18:09

We insist on a mileage log, right from the start of the engagement.

If the client starts to provide estimates, with no back-up, we make sure our working papers are titled "Estimate of Mileage expenses provided by X director or proprietor" . and refer to that title in correspondence.

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By penelope pitstop
14th Nov 2019 19:43

I keep an accurate diary of business mileage. It is accurate to the mile over a year.

However, I know my business mileage each year will be 2,000 miles +/- 100 miles either way.

But I still put the exact business mileage down

If I were a lazy so-and-so I would just put down 2,000 miles each year.

But I do not want to become involved in a protracted argument with HMRC.

So, ask your client if:

a) he wants "to sleep the sleep of the righteous" at night, or

b) wants a prolonged argument with HMRC if he were picked at random (rare but possible - it is a lottery - I had a client who was picked on 3 tax years on the trot. HMRC did not get a single extra penny out of it but it wasted tons of his time!)

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By penelope pitstop
25th Nov 2019 21:49

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By penelope pitstop
25th Nov 2019 21:50

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By penelope pitstop
25th Nov 2019 21:50

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By penelope pitstop
25th Nov 2019 21:55

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By penelope pitstop
25th Nov 2019 21:50

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By penelope pitstop
25th Nov 2019 21:54

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Replying to penelope pitstop:
RLI
By lionofludesch
17th Nov 2019 10:07

Stop hitting the button, Penny !!!

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