HMRC Business Mileage cuts could save your business money
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Did you realise the business mileage rates have changed?
Business mileage rates, or ‘Advisory Fuel Rates’ (AFR) for company cars are used to claim back business mileage or repay private mileage (if fuel is provided by the business) so that companies can look to avoid paying car fuel benefit tax.
As the price of fuel has reduced over the past year, HMRC has decided to cut business mileage rates by at least 1p for both petrol and diesel categories of company cars in their review. In addition, vehicles which use LPG fuel will also see a reduction in rate. This is an average of around a 10% drop.
HMRC reviews company car business mileage rates every quarter, each year. This quarter it has based its calculations on average fuel prices on one day in February (taken from the Department of Energy and Climate Change) and the average price of LPG (which is quoted on the AA website.)
Prices are currently at their lowest level in around 6 years and as you can see from the graph below, over the course of 2015 into 2016, fuel prices have reduced and are now levelling out at similar prices. This reduction in fuel price has prompted the HMRC to reduce business mileage rates, which in turn, will save your business money.
(Information sourced from gov.uk Weekly Road Fuel Prices)
Download new company car business mileage rates* for 2016 here.
Monitoring your business mileage
A reduction in Advisory Fuel Rates means businesses can save money on their bottom line which is fantastic. However, monitoring how much mileage is being undertaken by drivers is still of upmost importance. Failure to do so could result in still paying too much or too little, meaning businesses don’t actually see these savings.
Did you know it’s a legal requirement for businesses to accurately record the business and private mileage of their drivers? If the solution a business currently uses to monitor this mileage falls foul of an HMRC investigation it could mean a demand for unpaid taxes and a penalty that could be as much as £6,000 per driver, pa and HMRC can go back 6 years. In fact, the record amount one vehicle fleet was fined after an HMRC investigation on their mileage claims found them to be inaccurate, was £4.1million.
There is a way to accurately monitor mileage expense claims though. Business Mileage Monitor (BMM) offers an accurate way of accounting for and managing business and private mileage which is completely HMRC compliant.
BMM removes the issues associated with over and under reimbursement of business fuel costs and can greatly reduce the administration time for submitting and processing claims. This means businesses can take full advantage of this reduction in AFR from the HMRC.
Learn more about Business Mileage Monitor by visiting the website.