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Using Business Mileage Apps

23rd Apr 2021
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Introduction

To claim an expense as a tax deduction there has to be some evidence provided. With most expenses a receipt will provide sufficient evidence the expense has been incurred but what about business mileage? It is difficult to prove someone has travelled from A to B.

The usual way of keeping records has been to list the mileage either on an expense claim, spreadsheet, notebook or logbook with the following information:

• The date

• The purpose of the trip

• The start and end locations

• Client/Company visited

• Miles driven

Some Challenges

This is onerous, time-consuming and burdensome for many, especially those that travel regularly especially those that have their own vehicle i.e. courier drivers, sales persons etc. 

Will this completely allay HMRC suspicions of inaccurate business mileage claims? Perhaps not as claiming 0.45p / 0.25p per mile is a great way for unscrupulous directors to claim additional income tax-free while simultaneously reducing corporation tax. It is an area the HMRC will take a great deal of interest in if mileage is a significant cost to the business.

It is also common for businesses not to keep proper mileage records simply due to the amount of administration involved. Due to time pressures, a director is unlikely to spend their time detailing every trip, nor for a manager to check an employees expenses thoroughly.  They are unlikely to be aware of all the journeys the employee has made and are also not inclined to check through each employee mileage claim to see if it is valid in terms of a genuine business trip and whether the number of miles claimed is accurate. 

It is thus very easy for an employee to inflate or round up the number of miles claimed. Furthermore, an employee may intentionally or unintentionally claim for personal trips as well as claiming 0.45p instead of 0.25p if they exceed 10,000 miles for example.

The Solution

A mileage expense app provides irrefutable evidence that the Director/Employee had undertaken a journey for a start and the number of miles will be accurate. The only additional information that needs to be inserted is the reason for the travel and if it is a personal journey then it should be marked as Private then either it cannot be claimed as expenses or if applicable deducted from the employee salary. This will save a great deal of time having to keep logs or records of trips made.

The employee / director can download the information and claim expenses from the company through an automated process that links to the accounting system. 

The App will also flag if the 10,000 miles threshold has been exceeded and reduce the mileage rate claimed to 0.25p per mile.

A mileage expense app has several other benefits

1) Fraud Reduction

Employees can not increase the number of miles travelled/round-up Journeys, enter bogus trips or claim 0.45p when it should be 0.25 after 10,000 miles

2) Personal Mileage Deducted

The Company deducts personal mileage from the Salary of the employee so there is no fuel benefit or VAT scale charge.

3) Easier Vat Reporting

Facilitates vat claim as the finance department can download a report with the VAT calculated on fuel based engine size, fuel and month

4) Reduction in Errors

The additional data available from leading mileage and expense trackers can check for obvious errors. For example, “home to place of work” claims or private trips.

5) Route Optimisation

Additional data is available which serves to reduce costs. Able to monitor the length of journeys and miles - reducing costs by advising the driver of the optimum routes to take in future. Cost per mile analysis including why journey is taken longer or costing too much

6) Improved Employee Utilisation

Track Vehicle whereabouts and help logistics reducing time for deliveries, resulting in improved utilisation of employee time.

7) Reduction in Fuel Costs

Analyse driver’s mileage consumption and encourage better driving lower fuel costs.

8) Reduced Driving Risk

Monitor driver’s behaviour including speeding. Speeding can increase the likelihood of accidents and fines.

9) Reduction in Co2 Emissions

Fewer miles means lower fuel costs with reduced C02 emissions better for the environment

10) Online Vat Receipt Storage

VAT receipts stored electronically rather than dealing with thousands of receipts

Summary

A mileage app only costs less than £5 a month but the financial and non-financial benefits make the app an essential piece of software for both small and large businesses. With making tax digital and driving towards automation, a mileage app will further streamline processes bringing significant time and cost savings. 

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