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Readers' forum - Fuel faux pas

06 October 2005
Issue: 4028 / Categories:

We have a number of clients who reimburse their employer for private fuel in respect of their company vehicles. The employees have been keeping full records of private mileage on which to base their reimbursements.

We have a number of clients who reimburse their employer for private fuel in respect of their company vehicles. The employees have been keeping full records of private mileage on which to base their reimbursements.
The local tax office is extremely reluctant to accept that it is not necessary to keep a record of business and private mileage and has opened enquiries into all the employees of one particular firm. Most of these employees undertake very significant business mileage and it would be a burden to record business travel, which is in any event irrelevant. The local office says that 'although HMRC are not prescriptive, employees need to keep a record of all business and private mileage travelled so that private travel can be clearly identified'.
Can anyone explain how the details of business travel will assist the tax office in identifying private travel? Can readers please help us to persuade the tax office that it is simply not necessary to keep records of business travel?
Query T16,688  — Driven Crazy.


Reply by Thicket

Driven Crazy seems to be working on the premise that total mileage travelled is made up of business mileage and private mileage and having recorded the latter (and presuming the total miles travelled are easily ascertainable from the milometer), then it should be clear to all and sundry that the difference is business mileage.
The trouble with this — as I know, as HMRC certainly know, and as I suspect that Driven Crazy knows, but may be reluctant to admit — is that the average company car driver has little or no knowledge of the distinction between business and private mileage. This is unfortunate, as it imposes a higher level of record-keeping than may be comfortable. This alone is not an excuse for failing to keep adequate records.
Where the cost of fuel for company cars is met other than by the employee, there is a presumption that a fuel benefit will arise (see ITTOIA 2005, s 149 and chapter 13.3 of booklet 480). This benefit can be reduced to nil if:

  • the employee is required to and does make good the whole of the expense incurred for the fuel for private motoring; or
  • fuel is only provided for business travel.

In this case, it is the first of these tests that needs to be met, so what is meant by private motoring? This is defined in the negative as anything that is not business travel and includes travel from home to work. Business travel is defined as travel for which expenses would qualify for deduction if incurred by the employee. Reference has to be made to HMRC booklet 490 to establish HMRC's views on business travel. The booklet takes up approximately 40 A4-sized pages of examples. Even if all employees are scrupulously honest, how can employees be expected to have read and understood all of this? Obviously they cannot.
Any arrangement where it is hoped to avoid a fuel benefit cost by making good the cost of private motoring, and where full and complete records of every journey are not kept, is doomed to failure in my opinion. There is a presumption that a benefit will arise unless it can be demonstrated otherwise.
Driven Crazy is advised to consider the position carefully before trying to take on HMRC on this point. HMRC are far too experienced to be convinced by his argument alone. It might be possible to offer a test case for one or two drivers to keep a detailed record of business and private mileage for a test period, and to compare this to the average of previous months.
I am all for supporting the taxpayer where HMRC are being unreasonable: this does not seem to be such an occasion.  

Issue: 4028 / Categories:
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