Fuel for a company car

payrollpro

I am hoping someone has a clever and cunning plan for this one.

My client has 300 employees but only 3 company cars and I have discovered that one of them used his company credit card to purchase the fuel for it. Previous incumbents have accepted his personal statements that none of the fuel purchased using the credit card was ever used for personal journeys, that he put extra fuel in using his personal credit card and that because they have another car there was never any need to use the company car on personal journeys.

I don't buy any of that, but then I am a cynical sod who has neither an ounce of compassion nor any flexibility when it comes to compliance. There is no evidence of this to help me anyway.

I am struggling to find an answer other than to make a voluntary settlement for the last four tax years, or allow the client to bury the issue and hope HMRC don't carry out their own review. I think they know that if there is a formal review this one will spill out so fast it will make their heads spin.

There are records, of sort, because the driver would write the total miles driven on to the fuel receipt, but there is no log of any journeys and the information given shows wildly varying performances. We don't have the start and finish odometer readings for each month and hence not for the tax year either so I can't compare the business travel to total miles done.

There are no personal fuel receipts and therefore no proof he put any fuel in personally at all (not that these would be proof anyway) and the worst bit is that, contrary to his original statements, the car was not kept at the normal workplace but at his home which confirms that commuting travel is included in it all. (I discovered this simply by asking the area manager about the facilities used to store the company car. Not sure why my predecessor didn't ask, maybe he didn't want to hear the answer!)

My conclusion is that this is company provided fuel and that a fuel scale charge should have been declared each tax year on P11D and that this needs regularising now. My advice to the client is to make a voluntary settlement of around £10k but I'd like to offer a get out if I can find one.

Anyone able to help?

Payrollpro

baduk10

Hi Ya

I'm going to make the assumption that you are not an actual employee of the company, therefore external?

If you are external to the company then I guess so long as you inform the director of their legal obligation, it would be then their responsibility to ensure that they comply with current legislation. As they say you can lead a horse to water, but you can't make it drink it!!!! If this is the situation then I would let the authorities make their assessment; they can then take appropriate action....

If it's any consolation i share your viewpoint 100%.

PAMDILL

I have been caught out by this in the past and even with fuel receipts showing personal fuel purchase and proper mileage records the fuel charge still had to be paid on P11d.

baduk10

Oh.... very interesting

Oh ok - i find that interesting: we were recently asked to supply all of our motor expense records to the IR for inspection. The information supplied was passed. Our company does supply all of the fuel for the company cars, but the employee's that have cars are requested to reimburse the company, on a monthly basis with any private miles they travel per month at a rate of 0.12p per mile. The revenue seemed to be happy with this arrangement, which is surprising since some of the employees may only declare 50 private miles travelled per month, which makes a grand total of £6.00 to be reimbursed. Too be honest I do find the declaration somewhat ridiculous, but then I am not with the employee day and night so wouldn't know what their private miles would be....

It seems to me that the IR investigation efforts seem to be somewhat woolly - they just don't seem to be able to put 2 & 2 together….

payrollpro

Interesting views, yes I am an external to this company sorting out the payroll whilst compiling an invitation to tender for new HR/payroll software and services but one of the key aspects of any big exercise like this is to make sure the employers practices are good, robust and compliant otherwise brand, spanking, shiny new systems will often make the problems worse.

You are right, baduk10, all I can do is recommend a voluntary settlement and if the employer, my client, decides not to bother then I am obliged to withdraw, decline to act and then consider my MLR responsibilties.

So far all the posts I have made seem to be coming up with the same answer, a fuel scale charge added to the P11D company car and failure to do so means tax penalties capped at the tax loss suffered, which means, yippee, I dont have to gross it up.

Your additional comment baduk is very interesting and I wish we all encountered revenue officers like that. The correct method is to ensure you have the start and finish odometer readings for each tax month, and hence the tax year, you take the total mileage for the year, deduct the business mileage logged by each driver and multiply the balance by the advisory rate for that vehicle. As long as the payments recovered from the driver are at, or in excess of that value there is no BIK and fuel scale charge to report.

I don't think what HMRC was doing in your case went anywhere near proving that no company provided fuel was used for any personal journeys. My problem here is that I have to deal with a similar personal declaration which is worth nothing because it is possible to provide evidence and HMRC will only be flexible if it is not possible to supply true evidence, for example London Oyster card or overseas subsistence in a non English speaking restaurant (Don't believe me? I sent a copy of a Thaiwanese bill to Salford as it purported to be the receipt for a meal for four employees on a business trip and for hundreds. HMRC said accept it as there was nothing else you could do).

In these cases it is possible to put together a proper case and considering the tax charges involved I am very surprised they were not more assertive over it, but never mind, ours is not to reason why, ours is just to do, and then complain about it.

Payrollpro

baduk10

Hello

It does appear to be a very frustrating situation for you, and it's a situation I find myself in on a regular basic. I have been in conflict with my directors on and off for the past four years now over rules and regulation. I’m afraid I take legislation very seriously and stick to HMR&C rules to the letter, yet my directors are the opposite. I have resided to the fact that my responsibility is to make them aware of the legal responsibility and current legislation and if they choose not to adhere to it then on their heads be it! It’s a very frustration situation, but until the employment market picks up I have very little choice.

Another interesting point is the odometer issue you raised. As I said before I was concerned with the mileage being travelled and insisted on the start and stop mileage so I could reconcile the miles. Unfortunately most of our sales reps are not office based, so I was only able to take their word for the closing mileage. I did call the HMR&C to get their take on the mileage issue hoping for them to support my viewpoint, but their response was that opening and closing mileage wasn’t required, which kinda made me look stupid too be honest. It just appears that the revenue doesn’t really help itself and they really are not as thorough as I feel they should be….

payrollpro

Unbelievable!

You are right, the odometer readings are necessary but if HMRC are determined to undermine our efforts to improve compliance then who are we to argue? What gets me is that on the phone their advisers say no its not necessary but then when a compliance team moves in they reject the records because there are no readings given so you look idiotic from both directions at once.

My understanding is that travellers must produce "evidence" of the cost involved and in the case of mileage it is either the start and finish post codes or the odometer readings as these mean the cost can be verified independently. Revenue officers have distance software on their laptops and I have seen them test checking claims and company car records using that software so it really is not good enough to have such a cavalier attitude on the phone when they know their colleagues will just clean up when they visit.

Some officers have stated that they operate the same rules for cars as they do for vans - i.e. total mileage for the year, less the obvious business mileage and if the balance is not too bad they ignore it, yet the rules couldn't be more different and how are we poor saps to know which rule they will operate and which ones will come down hard?

We have to try and organise our employers and clients to be compliant. In your case you can carry on working if the company decides to ignore your advice but MIP's have to consider their licence and the correct way of dealing with it is to decline to act (quietly) and submit a suspicious activity report and then consider whether the practice is allowed to have such a client.

Beware though, HMRC may have been a wooly with some things in the past but expect them to change, if the rumours are right.

Payrollpro

baduk10

Hi

Hi Ya

Totally agree with your points. You are right in that I am employed, so long as I inform the directors of their legal obligation then as far as I am concern my job is done. I get so frustrated by a director’s attitude in that they think they have an inherent right as a director to “cherrypick” which legislation they will adhere to, or further more “interpret the legislation” so it fits best with them!!

I totally appreciate your situation. I spent nearly 5 years in practice and everything was played to the letter of the law. I’m not and probably will never be a “MIP”, but if I were then I wouldn’t hesitate to decline work under these conditions. As you say licences, membership and reputation are worth far more than a fee note. It is a shame that there are qualified accountants out there with such a cavalier attitude – in my view they let the side down.

I hope and pray that the rumours are true – I would love to see a clampdown… the sooner the better in my view.

Regards

Barry