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Counting Cost Of Year-end Reconciliations

While businesses get used to living with unsettled economic conditions, Peter Eldon, managing director of car fleet solutions specialist Toomey Opticar, suggests that eliminating unnecessary expenditure within the car scheme should be addressed before cutbacks are made elsewhere .

With little sign of the black economic clouds lifting, there will be few companies that aren’t taking serious measures to get themselves into the best possible financial shape to weather the economic storms ahead.

The sensitive and complex nature of the company car scheme means that it may not always be the first area for scrutiny, yet within it lurks the likelihood of tax leakage that is costing the company significant amounts each year. The good news for company car scheme operators is that substantial savings can be realised without devaluing the car benefit for drivers.

Far too many businesses still suffer unnecessary pain and avoidable tax bills because inefficient fleet administration forces them into costly and complex end-of-year mileage reconciliation exercises to align AMAPs (approved mileage allowance payments) used against actual business mileage driven.

Many schemes estimate AMAPS at the start of the year based on expected business mileage. With HM Revenue & Customs (HMRC) requiring the matching of monthly records to prove that AMAPs usage is accurate and timely, the inevitable result is a year-end reconciliation which ultimately reveals AMAP overpayments – resulting in a hefty payment back to HMRC.

You can double that amount by including the unrecoverable AMAP underpayments to drivers who recorded more than the anticipated mileage - and now we are looking at a serious sum of money lost to the company.

While many businesses will negotiate with suppliers to reduce running costs or even review their supplier base to try and reduce costs, the reality is that rising car manufacturer pricing and the various leasing charge-backs that seem to find their way back into the mix will render any negotiated savings negligible and, at best, short term.

Meaningful and sustainable savings can only come from eradicating tax leakage from car scheme administration. When it comes to cutting back in times of economic recession, plugging those leaks should take priority well ahead of chopping overhead budgets elsewhere within the business

At Toomey Opticar, we offer a unique solution that leads each company driver to the most tax-efficient funding option. Then we use monthly mileage recording linked to payroll reporting to make sure that every available AMAP is used to achieve maximum tax efficiency throughout the duration of a contract, with no year-end reconciliation headaches.

It’s a “win-win” situation. Companies can cut hundreds of thousands of pounds a year from their car fleet costs while drivers are fully informed of best way to engage with the car scheme. Who said that clouds don’t have silver linings?

For more details, contact Toomey Opticar on 01582 518181