Accounting & Finance
How To Calculate Business Mileage Done and Benefit from Tax Deduction
When it comes to vehicle fleet management, there are a lot of costs to take into consideration. No matter how many vehicles a business has in their fleet, from fuel to registration fees and insurance premiums to servicing costs, vehicular expenditures can rack up to thousands of pounds per vehicle every year.
However, there is a reliable way to reduce these costs for fleet businesses by calculating their business mileage and deducting them from their taxes at the end of every tax year.
Miles spent driving to meet clients, delivering a large haul, doing supply runs for the office or odd jobs driving around for the company can quickly add up to thousands of miles throughout a year.
Business owners tend to think that tax deduction will save them only loose change but their business may end up with a substantial deduction from the taxes owed to the state. If a business has the right tools to benefit from the mileage deduction service to the full extent, they will be able to reduce their annual tax payments significantly.
The deduction rate per business mile is determined by the HMRC annually, and it is subject to change every tax year. The mileage tax deduction service is intended to compensate fleet businesses for their operating expenses such as fuel, servicing fees, depreciation and insurance premiums. Logging business mileage accurately is not a simple task when done on paper, but, thanks to the latest advancements in GPS Tracking Systems, it’s now easier more than ever.
To put it bluntly, a commercial company vehicle that travels 15.000 miles per year allows a business to deduct £5750 (45p x 10.000 + 25p x 5000) from annual tax payments. This is a significant amount of money, and it is only from one vehicle; now imagine having 10-15 vehicles in your fleet, and the total mileage tax deduction will amount to the tens of thousands of pounds.
That is if you have the proper paperwork and records of the business trips taken by the company vehicles with detailed information required by the HMRC. The HM Revenue & Customs doesn’t allow companies any guesswork and estimate their data. All business mileage records have to be precise and include details such as the destination, purpose of the trip, the date and miles traveled.
Gathering and keeping detailed records of every single business trip may seem like an impossible task but we live in an age of technology and advanced devices like vehicle trackers can help greatly with these tasks.
With a tracking device onboard the vehicle and the Trip Log feature, companies can easily gain access to every individual trip information and determine which of these trips are for business purposes with the push of a few buttons. With such a convenient tool at hand, business managers will have no trouble at all providing the HMRC with the reports containing the requested information.
Managers have an important and challenging task when identifying the business trips for trips taken by the company vehicles. Single-handedly going through hundreds of pickups, drop-offs, deliveries or client meetings would take an exorbitant amount of time and the whole process would increase the likelihood of mistakes and miscalculations.
The tedious task of distinguishing business trips from personal trips can be trivialized with a simple vehicle tracking device and Trip Log; a sophisticated tool that allows business managers to identify private and business use of fleet vehicles and keep comprehensive records for tax reimbursements.
HMRC has a set of rules to help business owners and managers as they need to be informed about what qualifies for a business trip or a personal trip. Submitting false mileage data or trying to deduct unauthorized vehicle usage is a crime and it can trigger an audit from the HMRC.
The guidelines are clear on the topic; work commutes from a permanent residence to the place of employment, side trips such as shopping, family visits and any personal use of company vehicles are ineligible for mileage tax deduction. On the other hand, employees who require a vehicle to do their work such as delivery personnel or a lorry driver, the trips that are taken by these employees are considered as business trips.
There are also professions that require an employee to travel to a job site such as sales agents, lone workers, and service agents. These journeys are also classified as business trips because the employees cannot perform their duties unless they reach their assigned job sites. Trip Log reduces the time it takes to separate business and personal trips and compile mileage reports drastically. Every trip taken by a company vehicle is recorded and stored on the cloud-based tracking servers and can be accessed on-demand.
Managing and reducing costs is all about finding the small and significant details to save money. All it takes for a company to benefit from the mileage tax deduction is to keep thorough reports of their business trips and provide the HMRC with proof that these trips are wholly and exclusively taken for business purposes.
Social Media5 years ago
Top 5 Advantages and Disadvantages of Social Media Marketing
Management11 years ago
The man who destroyed his multimillion dollar company in 10 seconds
Innovation5 years ago
Five Common Materials Used In Manufacture Reusable Grocery Bags
Management10 years ago
If You Fail To Plan, You Plan To Fail