To track business mileage and report it can be a pain, an unwanted distraction hovering on a to-do list of more pressing jobs. However it is important for a number of reasons. The financial impact for you personally can be significant. It’s often easy to forget to log a trip – especially if it’s only short – but these trips can quickly add up to financially significant sums over the course of weeks and months.
Why Track Business Mileage?
For those already claiming mileage, failing to record a full and accurate record can leave both you and your company open to penalties from the HMRC, who won’t accept estimations or averages. This means you could be asked to repay significant portions of your mileage claim for that year and any preceding years under the scope of investigation, with a healthy fine to boot!
The Benefits of Recording Your Mileage Claims
If you drive just 20 miles for business each week and claim them back at 45ppm, you stand to receive just under £500 for the year, tax-free. Not bad for just a few small trips and well worth the effort of recording your mileage! Scale this up to 100 miles a week and over the course of the year you could be looking to claim back a tax-free sum of £2160!
What Counts as Business Mileage?
The HMRC states that business mileage consists of:
- Journeys forming part of an employee’s employment duties (such as journeys between appointments by a service engineer or to external business meetings)
- Journeys related to an employee’s attendance at a temporary workplace
Employment duties can include things like:
- Errands and supplies – Driving for business related errands just as dropping of parcels or picking up office supplies.
- Travel between offices – If you have to travel from your normal place of work to a second place of business.
- Business meal and entertainment – This includes trips to visits clients for meals or entertainment.
- Customer visits – Driving to and from meetings with clients
- Sales meetings – This includes traveling to meet potential clients
- Airport/Travel – Driving to or from the airport on a business related trip
One journey you can’t claim back is your commute to your normal place of work. As long as your contract states the office as your place of work it can’t be counted, even if you work at home for the majority of your time.
However if your place of work is stated as your home either because your employer doesn’t have the necessary facilities or you work remotely then your home can become your workplace. That means any trips made to other offices can be claimed back as business travel.
The Risks of Not Properly Recording Your Business Mileage
If you are claiming back your business mileage but not properly recording it, you could be at risk during a HMRC tax inspection. If the HMRC deem your mileage records are not accurate or comprehensive enough then they can ask you to repay the entire amount you have claimed. If they deem you were fraudulent with your mileage claims they can even add interest and fines on top of the amount you have to repay. In most cases the HMRC will only back 1 year but they do have the power to go through the last 5 years of your accounts (or more in specific cases).
The HMRC will not accept estimates of your mileage, it has to be an accurate log stating each journey. The more information you include in you mileage when you track business mileage, the better. Useful information to include is:
- Where your journey started and ended
- The exact mileage of each trip
- The time and date of each trip
- The reason for the trip
With these details recorded when you track business mileage you can rest assured you won’t fail your next HMRC tax inspection.
The good news is that recording and reporting your business mileage doesn’t have to be a time consuming process. At Autotrip, we can help you track business mileage to create accurate mileage reports in minutes, with no need for you to manually log any of your trips. For further information on the specific HMRC guidelines check out this post.