Where no vehicle benefit is declared, HMRC now require the employer to be able to demonstrate that there has been no private use in theory and practice. The key to this - mileage records.
Since 2009, ABAX has designed, marketed and sold GPS telematics systems built around the rules governing vehicle usage within the work place. These rules are set by HMRC. A common misconception we hear from clients is that there are no specific requirements for them to maintain mileage records for their vans. With the release of the 2016 edition of HMRC's tax guide to Expenses and Benefits 480, ABAX have excitedly studied the 133-page document to clarify exactly what businesses and their employees need to do to stay compliant.
Thankfully, to add transparency to a formally grey area, HMRC have included paragraph 14.20 listing the requirements for van usage.
"Where a nil-return is made [on the employee's P11d], it will be necessary to demonstrate that the necessary conditions have been complied with in practice, as well as in theory. Useful information will include the terms and conditions on which the van is made available to the employee and mileage records showing actual use."
What does this mean for businesses and their employees who use a van for work? Where an employee's P11D records no benefit relating to their company-supplied van, HMRC can request both the employee's contract and a history of their driving records. The contract should stipulate that the vehicle is to be used for business purposes only and mileage records should demonstrate that this is indeed the case.
Failure to provide information of sufficient detail or quality to support the declaration on the P11D can result in a £3000 fine for poor record keeping, a requirement to repay all taxes and national insurance owed on the van, with the further possibility of a fine of up to 100% of the amount owed. Further still, HMRC can backdate the fines, penalties and tax owed, with interest payable, for 6 years.
In order to protect the business and employees from HMRC, companies should invest in creating a thorough driving policy, review contracts where vehicles are issued and set out a well structured and fully audit compliant system for recording of business mileage. HMRC suggest detailing the dates, start / finish locations, mileages and reasons for all business trips.
Thankfully, ABAX are world leading specialists in the development of GPS mileage logging systems. This automates many of the processes that the tax authorities find desireable but can be a real pain in the backside in reality.
For more information, contact us on 01733 698888 or request a brochure via firstname.lastname@example.org