records keeping

records keeping

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Hello,

Our company (a start up private limited company with annual turnover of circa 2.5mln but not paying corporation tax yet) has a pool car and satisfies conditions:

-used by more than one employee

-not ordinarily used by one employee to the exclusion of others

-not normally kept at or near employees' homes unless it is kept on premises occupied by the business

-used only for business journeys. However, we do not keep a mileage log neither do we have any internal document saying that non business use is prohibited, etc.

Our accountant is saying that it is fine, HMRC will have to disprove if they think that we are using it for not only business journeys only. 

Same is with business entertainment expenses, there are no records of whom the meetings were with and why (as I understand is required by Bribery Act), we do have invoices thought. Again, accountant is saying that expenses are not too high, HMRC will understand that certain business meetings were taking place and, otherwise, they will have to disprove that those were not business entertainment costs.

I am not entirely convinced with these explanations, HMRC doesn't have exclusions to any types of companies. Are they accountant's explanations valid? Thank you very much.

Replies (6)

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By Tim Vane
22nd Mar 2016 17:28

If you don't trust your accountant, get a new one. Don't try and second guess them.

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By JimFerd
23rd Mar 2016 09:24

Different accountants will give you different advice on things like this.

In my experience it depends on the inspector regarding whether you'll need the logs.

In practice they have generally accepted cars as pool cars without the logs, but if you get an overzealous inspector you might wish you'd kept the them. That being said, unless the logs are very accurate and tie into the odometer, they aren't much use.

The same for the non-private use contract. It's more of an issue with vans, but it's an ideal option to have that document for cars too as it helps cover yourself.

In terms of the entertaining expenses - it's always good practice to keep a record of who attended the meeting. The directors/employees expenses will be allowable, whereas the customers wont be. If the accountant plans to disallow all these for tax, then an inspector probably wont care.

I don't think the accountant has given you bad advice as such, and it really depends on the circumstances of your business. 

For example. if all the rest of your record keeping etc is fantastic, and the pool car and entertaining issues expenses are clearly trivial to an inspector (eg you have a fleet of BIK cars and only £1,000 of entertaining), then you might be wasting your time keeping such detailed records of minor things.

However if you'd feel more comfortable keeping more detailed records - then keep them. It can only help if you do so.

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By Duggimon
23rd Mar 2016 10:29

Regarding your pool car, you can probably get your insurance a little cheaper if you specifically exclude private use from the policy. If you have already done so then you effectively have done all you need to make it unavailable for any non-business journeys.

 

Your accountant is almost certainly correct in what he's said but I would never dissuade a client from keeping more detailed records than I felt was strictly necessary. The very letter of the law, as you have discovered through your own research, does perhaps require more detail but in a practical sense it's unlikely to ever come to bear.

If however it would make you feel more comfortable about compliance then it would be valuable to undertake more detailed record keeping. People tend to undervalue peace of mind, I would say if you would feel better keeping a mileage log and a ledger showing the dates, attendees and cost of entertaining then you should go ahead with it.

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Replying to johnjenkins:
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By Tykva
23rd Mar 2016 12:30

Pool car insurance states "Social, domestic, pleasure, business", the insurer explained that business part comes as an addition, and social, domestic, pleasure use as standard. 

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By ChrisScullard
23rd Mar 2016 12:48

I've been through one of these recently with HMRC and the view of that officer seemed to be it wasn't a pool car unless we could specifically prove it was - i.e.: burden of proof was on us.  Whether this is normal or not is another matter.

Also it is possible to have business only insurance policies (my client had one) and I think this is a very useful weapon to have in your armoury.  That said the officer we had stated that just because the insurance policy says business use only doesn't mean the usage was business use only.  Sometimes you can't win.

A lack of a mileage log was a problem.  If the vehicle is a genuine pool car how hard is it to have an exercise book in there where whoever has the vehicle simply fills in mileage when they get in the car, where they've been and mileage when they get out?  I suspect a well thumbed mileage log would be quite convincing.

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By jonahea
28th Mar 2016 15:00

Better playing it safe

There were quite a few stories surrounding pool cars and the HMRC in the early part of this year:

https://abax.co.uk/press/tax-risk-for-private-use-of-pool-fleets/

http://www.fleetnews.co.uk/news/fleet-industry-news/2016/01/26/tax-warni...

Your accountant is wrong in saying they have to disprove you. HMRC policy states that burden of proof lies with the business. I suggest that you start to keep accurate logs. If this is a pain there are cost neutral technologies that can do this for you using GPS. 

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