5 Reasons Your Business Is Losing Money in Mileage Claims
In a time when productivity and efficiency are vital, mileage claims are particularly relevant, especially when employees spend a lot of their work time driving for business purposes.
According to Autotrip’s Managing Director, James Finlayson, Your business might be incurring unnecessary costs if your drivers use log books or excel spreadsheets to record their mileage.
Below are the top 5 reasons why your businesses could be losing money on mileage claims and how you can simplify the whole process for your team, whilst making it more transparent and accurate.
Recording business miles can be a hassle which is one of the main reasons why 89% of drivers submit inaccurate mileage claims according to Flexed.
Manual methods can also cause employees to round up or over inflate their mileage as it is hard to remember to record every business trip made.
For example, according to Software Europe, the NHS is currently overpaying over £80 million a year in mileage claims because employees overclaim 80% of journeys. On average, 2.5 miles are added to each journey.
What is worse is that 41% of employees don’t consider over-inflating expenses to be wrong, although their actions constitute fraud, according to a survey run by Allstar Business Solution.
When asked why they over-claimed their expenses, 28% said it was simply because they were able to get away with it.
Waste of Time
54% of drivers take more than 2 hours per month to submit mileage claims.
Supposing each employee spends 6 minutes per day logging their business mileage manually, this would amount to 30 minutes per week or 26 hours a year. That’s over 3 working days, which is a lot of time unnecessarily wasted.
Of course, businesses need to also consider the additional time that fleet managers spend reviewing mileage claims, which, more often than not takes longer than logging the mileage.
If you have a team of 5 drivers, each one earning an average of £15 per hour, just the act of logging mileage can cost a business over £2000 per year, excluding the time admins spend reviewing mileage claims.
Reclaim VAT back
Any VAT registered business (not part of a flat-rate scheme) can claim VAT on the fuel portion of a business trip. This can be a good way for your business to reduce mileage costs, especially if you have a large fleet or if your drivers clock a lot of mileage.
A report published by the government in 2018 states that only 180,000 recipients claimed VAT on car fuel in 2016 – 17 which demonstrates that many businesses are still not benefiting from this type of tax deduction.
Usage of incorrect mileage rates
HMRC sets recommended mileage rates which employers can use to reimburse their employees for any business-related travel in a company car or private vehicle.
This is important to know because HMRC will accept that your business does not have to pay tax as long as you use their rates (or lower) and employees have correctly recorded their mileage.
This type of tax exemption can quickly add up to thousands of pounds of potential savings every year for your business.
It is also worth noting that HMRC updates their rates every quarter. Forgetting to use their most recent rates could mean you reimburse your employees incorrectly and have to revise your mileage claims at the end of the tax year, resulting in your business possibly paying even more tax.
93% of SMEs would fail an HMRC mileage inspection, according to Business Motoring, as adequate records must be kept for up to 6 years. This can easily happen for many different reasons: the records are lost, log books misplaced, computers crash and lose data etc.
HMRC has also allocated £900 million to trace businesses who undermine the tax system and avoid paying their fair share, from this they can levy a fine of up to £3,000 per annum per employee for an incorrect tax return.
What is the best way to track mileage?
As we have seen, manually tracking mileage is an outdated and problematic method, especially as Making Tax Digital is becoming the norm.
Today, there are new automatic mileage tracking solutions such as Autotrip which can help your business save time and money managing mileage expenses.
Instead of logging mileage manually, drivers can fit a plug & play tracker into their cars, which runs in the background and captures every mile driven. This leaves less room for over-exaggerated claims and human error, whilst also ensuring HMRC compliance.
Together with the tracker, drivers have access to an app where they classify trips as business or private trips (visible only to them to respect their privacy).
Automatic mileage tracking solutions make life easy for businesses as well: claims can quickly be reviewed and are safely stored in the cloud so you can keep all of the relevant info in one single place.
Ultimately, these are productivity tools that can make your mobile workforce more efficient, helping your drivers to stop wasting time on mundane tasks and focus on the things that matter and adding value to the business.