Updated 20th February 2019
The administration of business and the personal use mileage can be a headache for firms who utilise company cars. Most companies are, apparently, not fully acquainted with the tax regime when it comes to reclaiming business mileage.
At the same time, drivers, with permitted private use of a company car, do not always strictly comply with the legal requirements; either underestimating private use mileage of a company car, or not recording it on a regular basis.
Whether it is a case of deliberate fraud, estimated private mileage figures that mildly exceed the real data or simply poor approximation, the consequences can be extremely costly in terms of fines.
Just how can companies and fleet managers protect themselves from potential tax bombshells?
#1 - Knowing the rules
Are you sure that all the staff are fully aware of the business vs. personal mileage legislation? Are you up-to-date with the revenue guidelines and do you have someone in-company taking care of the administration of business/private mileage who is able to advise anyone seeking clarification?
#2 - Being prepared
Ideally, the procedure for the recording of business and private mileage is to be written in clear, plain language as well as being fully explained to all employees together with the risks that poor or false record keeping could pose for both the employer and employee.
#3 - Effective recording
False or estimated mileage reports have to be avoided. Business and private mileage has to be recorded accurately and able to provide complete transparency. Some employers erroneously believe that if they are charged monthly for the personal use of a company vehicle, they are exempt from any record keeping obligations… but even if this is the case, full documentation is still required.
#4 - Applying Commute Rule and Toll Rule correctly
Travelling from home to a place of work is considered private use. The same is valid if an employee pays a toll while travelling to and from work. Any reimbursements should go through payroll and PAYE (Pay As You Earn), and PRSI (Pay Related Social Insurance) should be charged. Toll fees incurred on business journeys are paid free of tax.