Just been going through the detail of one of my clients mileage logs and they are charging more in mileage than the particular client actually pays them for visiting (The client gets £38 for an hours visit but claims £66.60 for 74 miles each way).
Whilst this is to my mind a pretty stupid thing to allow to happen I've not been able to find anything on the HMRC website to say that this is not allowed where basically income from other clients is paying for bad practice on this one.
Overall the client is showing a profit and can afford to pay the mileage from other clients income.
It could be that the gig is a loss leader but I won't be able to confirm the situation for above a week.
Anyone else come across cases like this and do you know of any HMRC ruling that states that this is not allowed?
talk later,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Naturally I haven't come across this situation yet in bookkeeping, but as an employee it is common to be able to claim a particular mileage rate for using one's own car on business.
I'm sure you've got the detail there, Shaun, but for everyone else's benefit that £66.60 works out as exactly 45p a mile; not an uncommon figure for business mileage claims. So it's likely that the client's standard policy for claiming business mileage is being applied, and this is usually irrespective of what is gained from the reason of the visit.
I can't see anything wrong with your client charging a flat rate for mobilisation, even if it is not as much as his actual mileage rate allowance. I would say that mobilisation is just another revenue stream. I dont directly charge my clients collecting paperwork, I have built it into my standard charges but still claim a mileage rate. Your client is just showing it as a seperate income line on his invoice.
As for HMRC I can see nothing to the contrary, they even state that mileage claimed does not neccessarily have to be the shortest route
Loss leaders happen all the time (look at supermarkets, noone questions why they do it, so why shouldn't anyone else?), but often its because the clients don't realise it. Don't worry about claiming it, but as you say speak to your client and make a note of the answer. You could find it useful in the futre if anyone questions it for ML (!)
I think he's meaning the client is only worth £38 for the hours visit but it is costing the client £66.60 to get to this client. Maybe I misread it. I didn't read it as the customer being charged £38 + £66.60.
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Never buy black socks from a normal shop. They shaft you every time.
it was just that it seemed strange that the client would agree to a contract which didn't actually cover the associated costs let alone their time which made me think that maybe there's something buried deep in tax law about the expectation of profit.
Then again, if such were the case then the whole idea of a loss leader would be flawed.
I'm not particularly worried about the case due to profits elsewhere but I will query this arrangement with the client as I want to ensure that there is a legitimate business reason for this and not simply reducing tax liability by ranking up the mileage on a job that would never turn a profit or lead to any role that would turn a profit.
It just seems wrong to me even though it probably is quite acceptable.
I'm going to continue to dig around about the expectation of profit on the HMRC website and business link to see if I can dig up anything more.
Thanks again,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Loss leaders - I know Asda must have had a loss leader with their "smart price" curry sauce. 2 or 3 years ago it was 4p a jar. Then 5p. 3 months ago it was 17p. Today it is 23p.
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Never buy black socks from a normal shop. They shaft you every time.
Yes, your right Peasie. The client is being charged £38 for the visit to their client but then the client is charging 45p per mile to their business which for the round trip comes to £66.60 (£28.60 more than they are actually making on the gig).
Hi Frauke, yes, I'm going to be having a chat with them when they get back off holiday about this and a few other discrepancies such as return journeys being different to outward joirneys with some clients. Whatever their response I'll write it up and get them to sign it for my records as a get out of jail free card.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Tesco homebrand shortbread. a month ago 9p per packet. today 29p per packet. Still cheap but wish our rates could escalate at those sort of rates!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
My favourite mileage claim this year was to Inverness and back. Unfortunately she also claimed a hotel bill in London's West End on the same day; naturally this was also an entirely business related expense. :o)
I'm glad it wasn't just me that was drawing a blank from my searches.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
a few other discrepancies such as return journeys being different to outward joirneys with some clients.
How much of a difference? I know myself there is a difference in miles with my own travelling because one of the streets is one way and it can add a wee bit extra on the way home.
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Never buy black socks from a normal shop. They shaft you every time.
If it wasn't for a legitimate payment received from the client concerned I would be suspecting something similar but on a smaller scale here.
I'm thinking maybe that the return journey mileage discrepancies may be fitting in a swift visit to Sainsbury's on the way home!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I know that there may be a small variance, when I pop to Edinburgh taking exactly the same roads it's about 3 miles further coming back than it is going but on a 568 mile round trip that's to be expected.
All in all I think that I just need to pin the client down and find out what the hecks going on here. Just frustrating when you can't contact them for a week and you want an answer now. (patience isn't one of my virtues!)
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
lol, yep yours was a serious point - all I can add is if your clients customer was dissatisfied with the bill - they have the choice to appoint someone closer.
Mine was a complete fabrication of a business trip along with an attempt to set off a Lloyd-Webber W/E against profits - I must check if it was her birthday or valentines :o)
I suspect that my clients reasoning is that they feel that their customer wouldn't / couldn't pay the mileage and would have got someone closer but they seem to have this mindset of accepting clients by looking at the top line rather than the bottom one.
Have you ever noticed that no matter how many times one beats a clients head against their desk they still don't understand the difference between turnover and profit! (having a bit of a Dr. Cox from Scrubs moment here).
If HMRC looked at this though I'm sure that they would simply see a case of my client basically paying £28.60 to visit a customer (£38 fee's less the mileage born by the company).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun, yes HMRC might see it like that (not sure how big your client is), but owner-managed firms so often see profits, salary, expenses, company car etc. as all part of their own back-pocket; and they are right because they have the control over it. HMRC ought to be trained to see the 'tiddler' companies differently, but I'm not complaining lol
Having the patience of a four year old on a sugar rush I gave the client a call last night to get confirmation of the discrepancies.
The major return journey discrepancy was due to the motorway being closed due to an accident. Minor discrepancies were as Peasie suggested due to one way systems.
The client who took £66.60 in mileage per journey has been dropped. Apparently it was a rookie mistake and they hadn't taken the costs into account when agreeing to the work..
I was quite happy with all of the explanations given last night so all sorted.
It was an interesting thought though about the costs compared to return when servicing clients. The only thing that I could find on this related back to the recognition of a business is an enterprise intended to make a profit. Of course, if costs are in excess of return whilst a profit motive may remain the likelihood of it would be remote.
All in all, as has been suggested by all of you. There does not seem to be any rule that states that our clients cannot bear expenses in excess of return although, of course if all clients did that for all customers their businesses would be pretty short lived.
Thanks for the input people, I found it an interesting excercise which was another one of those scenarios where it just felt as though there would be some rule to the contrary even though there wasn't.
Right, off to fill myself with Easter eggs now before back to work this evening. fun, fun, fun.
Talk later,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I've just sent an e-mail to a client who has just given me her mileage log so she can be reimbursed mileage from her company. My e-mail asks for confirmation where she drove to? The reason I had to do it, was because although her public transprts travel had dropped slighly from the previous year, she had also submitted taxi & publlic transports costs to client premises for many of the same dates in her mileage log.
Of course she may have been driving to a train/tube station - but I have to be sure as the miles claimed have increased from about 2,500pa (for the previous 2 years) to 16,000pa but the number of clients and amount of work has stayed the same.
