Do you accurately track your business mileage? No, let’s take that back a step. Do you actually track your business mileage full stop? You would be surprised how many businesses and employees don’t track or control their mileage.
How Can You Track Mileage?
There are many ways of tracking mileage, these include using a spreadsheet, keeping a journal and using an app. The people using the spreadsheets and journals tend to either go by the odometer reading to track mileage or they use Google Maps retrospectively to record mileage. We highly recommend you use an App to record mileage.
Why Use a Mileage Tracking App?
We recommend that people use TripCatcher to record business mileage. The reason for the recommendation of TripCatcher rather than a spreadsheet or journal is based on 2 primary reasons, journals get lost and spreadsheets can easily be deleted or corrupted.
If you use a cloud based App to track your business mileage the claim is accurate and the data is securely stored. In most cases the Apps also integrate with modern cloud accounting software.
There is also a time saving to be made. At Honey Bee Accountancy we ran a week long trial, comparing the time it took to record mileage on an App Versus Spreadsheet. During the week I made 20 business journeys in my car and recording the mileage with the correct level of detail to satisfy HMRC, it took me 1 minute per journey to log the mileage on a spreadsheet. Using the App took an average of 30 seconds. You might be think “yeah, but so what?!? It’s only 30 seconds!”, this is very true but over the course of 1 year the difference is a saving of almost 9 hours – or an extra day off just through 1 simple switch.
Accurate Mileage Claims
A couple of months ago I attended a meeting in Chichester, on the way home to Birmingham there was a serious crash on the A34 near Oxford leading to huge tailbacks on the A34. I got diverted off the main roads and ended up taking a 30 mile detour. There was no way I would have remembered what route I took. If I relied up Google Maps and a spreadsheet/notepad I would have under-reported my business by 30 miles or missed £13.50 (30 miles at 45p) worth of legitimate business expenditure. Now, £13.50 isn’t a huge deal, but how many times would this happen over a year?
Stop Fraudulent Mileage Claims
If you’ve got staff the submit mileage claims then you should definitely look at investing in a mileage tracking app. Figures provided by Business Car Manager (TMC) (www.businesscarmanager.co.uk) suggest that 1 in 4 employees submit a fraudulent mileage claim, that’s 25% of the workforce!
This has a double whammy effect on your business. First of all you may be paying cash out of your business that it doesn’t need to, negatively effecting your cashflow. But, and arguably far more serious, you will have submitted fraudulent accounts to HMRC and therefore underpaid the businesses Corporation Tax. TMC said it knew of five on-going cases in the last four months, ranging from fleets with 103 cars to those with 1200 cars with more than £2,000,000 in back taxes and fines possibly on the line.
HMRC VAT Compliant Claims
If you are a VAT registered business, the rules surrounding the amount of VAT you can claim are complicated. Please DO NOT assume you claim 20% of the 45p mileage allowance as this is incorrect and will land you in hot water with HMRC. To reclaim the VAT on mileage you must apply the HMRC Advisory Fuel Rates. These are reviewed every 3 months but they don’t always change and when they do change, HMRC don’t send you a letter to notify you! However, if you use a good quality App to track the business mileage, they are updated with the latest advisory rates to ensure you are HMRC compliant.
Other Benefits of Accurate Mileage Tracking
You can maximise the business mileage that you claim, for example, did you know that if you have a passenger in the car you can claim an additional 5p per mile (HMRC guidance – https://www.gov.uk/expenses-and-benefits-business-travel-mileage/passenger-payments) but to be clear on this, the rules around this are aimed at those in employment “employee carries another employee in their own car or van on a business journey”
But I Don’t Drive For Business Meetings!
So, for those eco-friendly or fitness people that love to cycle to business meetings, etc. Don’t despair, you’ve not been forgotten! If you use a bicycle for work, you can claim 20p per mile. This is great news for bicycle couriers and the “Cycling Solicitor” that I used to attend BNI with.