VAT’s important

From January 2011, the standard rate of VAT rises to 20%, but fleet owners may legitimately beat avoidable tax bills by using telematics. TomTom explains how.

When acquiring a new a car, HM Revenue & Customs (HMRC) says companies can only reclaim VAT on a vehicle if there is proof that “the car will be used exclusively for business purposes and you can show that it's not available for private use by your employees or anyone else. For example, your employees' contract of employment excludes private use including travel from home to the place of work.”

But it continues: “If you were able to reclaim the VAT when you bought a car, it's important to monitor how the vehicle is used. You'll have to account for and pay VAT - output tax - on the 'current value' of the car if it's no longer used exclusively for business purposes...”

So while the standard rate of taxation on all items is rising by 2.5%, fleet users will be able to recoup some - if not all - VAT if they can prove to HMRC that their fleet vehicle is used for business purposes. Even if all VAT cannot be claimed back, by carefully documenting the proportion of business to private mileage, you may be able to claim at least some VAT back. That could also be critical to those hoping to gain a 50% VAT rebate on leased vehicles.

This is where telematics may be able to assist as an easy-to-use tool for record-keeping and thus proof of use. TomTom Business Solutions’ telematics systems allow accurate accounting of vehicle usage through comprehensive, retrievable data that takes the guesswork out of maintaining a logbook. Using the TomTom satellite navigation device, employees can simply click private or business icons to register the purpose of the journey. This data, along with journey time, distance and route taken, can hen be fed directly into your backroom systems with minimal administrative effort.

Among telematics’ many benefits is the provision of accurate information about the various uses of the vehicles, which can help with VAT and other areas of taxation such as Benefit in Kind, and also provide concrete data for more accurate mileage claims. By using these systems, businesses may not only recoup significant parts of tax bills, but also cut fuel bills, improve productivity and meet legal compliance regulations. TomTom offers a range of products with a typical ROI of just six months. Get connected and reduce your exposure to tax.

* To find out about how TomTom Business Solutions can improve your fleet efficiency today, visit www.tomtom.com/business

* For more compliance advice and fleet management best practice, go to our Compliance page and sign up for our monthly bulletin, in association with Tachodisc and TomTom Business Solutions.