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Car Fuel - Massive retro tax bill.

(17 Posts)
CogitoErgoSometimes Sun 24-Nov-13 11:23:12

My friend has been slapped with a big (£10k+) tax bill from 2008-2011 for car fuel. I'll preface this by saying that I've advised him to get an accountant to fight his corner urgently. Wondered if any MN tax experts can give me a steer in the meantime. He's distraught.

The crux of the matter is that during those years his regular base for work was home but he traveled about once or twice a week to the company HQ 150 miles away. The fuel for those trips was paid for by the company and the mileage was all documented at the time. HMRC are now saying that his regular base for work was the HQ and so the journeys from home are treated as private mileage with any fuel provided taxable. He's since left the company.

Personally, I think there is a case to argue and that, if the company confirm he was home-based, he would not be liable.

Any thoughts?

Mrsmorton Sun 24-Nov-13 13:56:42

Just bumping this for you cog, you're so helpful to me. I'm afraid I can't help with tax but someone will be able to!

CogitoErgoSometimes Sun 24-Nov-13 14:11:01

Thanks. I think I missed out that this was a company (leased) car... in case that wasn't clear.

If its a company car, then the amount can only be for fuel. 10k looks very high based on the info you have given. I suppose it could be a gas guzzler...

I think the key point is going to be the frequency. If it was a couple of times a month, it would be clear cut that friend's regular place of work was home.

I'm a bit worried from playing with my calculator that the frequency works out at twice or more per week, in which case I don't think friend stands any chance of winning the HMRC argument.

I find this forum a very good resource for tax queries: www.taxationweb.co.uk/forum/income-tax-f6.html

(I don't make any money from any links in my posts)

CogitoErgoSometimes Sun 24-Nov-13 17:26:58

It was max twice a week, 300 mile round trip, regular diesel saloon. I was trying to work it out as well. If roughly two round trips constitute a tank of diesel... call it £70? ... and he did 100 trips per year for three years that's £10,500 which is the size of the bill. Who determines the 'regular place of work'? The employer? The relative time spent working in a particular location?

LoveandLife Sun 24-Nov-13 17:41:42

Hmm, but the tax bill is for the income tax on the benefit he had, which was free fuel. If he only claimed for £10,500 of fuel, the tax would be (max) half of that.

HMRC view on what constitutes a place of work Seems unlikely that he will be able to show home was his place of work for tax purposes I'm afraid.

LoveandLife Sun 24-Nov-13 17:54:00

Did he claim for fuel or did he claim mileage? (isn't mileage more usual?)

300 miles x 100 x 3 = 90,000 miles at, say, 40p per mile = £36,000, so £36,000 claimed in expenses, which makes £10k tax bill about right, unless he can prove he worked from home because he had to rather than by choice.

Presumably he has records showing how much he actually claimed in expenses?

LIZS Sun 24-Nov-13 17:56:28

If the car is deemed essential to the work (and a lease might suggest so) then I think the mileage allowance is capped much lower by HMRC , around 30p raterh than 45p. This changed a couple of years ago.

CogitoErgoSometimes Sun 24-Nov-13 18:01:14

Everything was paid with a fuel card (settled by the company) and then he had to submit mileage records showing business vs personal miles... the trips to the HQ being shown as business miles.... and reimburse the company for any private mileage. His work involved a lot of travelling and I know he's quite sharp on submitting accurate expenses etc. Being a company car driver myself, I also thought that the tax was a percentage of the value of the benefit and not simply a £ for £ on what was spent on fuel. That's why I've suggested he pays an accountant to take a look

riksti Sun 24-Nov-13 18:14:44

I think your friend really needs professional advice. The rules for home as workplace are complex and hard to satisfy but it is possible. Whether HMRC accepts that his workplace was his home depends on the contract he had, the position he was in with the company, the employer's working practices etc etc. so it's difficult to advise if we don't have all these details. Additionally, has the employer already had a PAYE visit where they conceded that your friend's workplace was not his home? If so, it's harder for him to argue that it was.

CogitoErgoSometimes Sun 24-Nov-13 18:21:58

I've no idea about the PAYE visit or contracts unfortunately, but that's the kind of thing I'll ask him to check. The company, although legitimate, was not run very ethically and that was one of the reasons he left. If there was any financial advantage to the company of telling HMRC he was based at the HQ, they'd do it.. put it that way.

riksti Sun 24-Nov-13 18:28:16

I can't see that there would have been a financial advantage as benefits cost the company money as well. They have to pay NI on the amounts HMRC assesses. I think all he can do is present his case and see what HMRC comes back with, preferably using an adviser experienced in HMRC enquiries.

This HMRC manual www.hmrc.gov.uk/manuals/eimanual/eim32170.htm talks about home as permanent workplace and the surrounding rules.

LoveandLife Sun 24-Nov-13 18:51:15

I debt think he does, necessarily, need professional advice. Not yet anyway.

He needs to go through his expenses claims and separate those that were undisputed business mileage and this thats were from home to ho.

HMRC will be able to show him which claims they think are taxable and he can produce evidence for/against that.

Then he needs to talk to them about whether home really was his workplace.There's only any point in employing an export uf tgey're going to save him mire then they cost

CogitoErgoSometimes Sun 24-Nov-13 19:32:19

Thanks all. Poor guy's gutted about the whole thing and looking at taking out second mortgages just to pay the bill.

LoveandLife Sun 24-Nov-13 19:34:28

Cog; don't let him do that. Worst case, if he does have to pay it all, I'm sure hmrc will take payment in installments

CogitoErgoSometimes Sun 24-Nov-13 20:04:22

I'll give it my best shot smile

caroldecker Sun 24-Nov-13 21:29:17

There is a special rule for fuel being paid by the company for private use here. This depends on the car, but the tax bill would probably be lower than described above - and is legitimate as they paid for the fuel, not expenses per mile.

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