Fleet Telematics Helps Avoid Tax Man

There was a minor buzz recently when film actor Ben Affleck announced he'd engaged in card counting while playing blackjack in Las Vegas. Though not illegal, gambling establishments see card counting as a form of cheating and in the past they were known to treat the ones they caught harshly, in their off-the-books way. 


Of course the news about Affleck's unwelcome  behavior spurred a number of websites into running explanations about the strategies casinos use to protect themselves against card counters.

The unsurprising answer was that they use experts; card counters whom through various means they've enlisted, to sit up in hidden surveillance spots monitoring the action down on the floor. Being themselves well-schooled in all the tricks of the trade, they know, of course, all the things to watch for. To catch a cheat, you use a cheat. No news there.


In the UK, earlier this year, Her Majesty’s Revenue and Customs (HMRC), apparently unhappy at the piddly revenue streams they'd generated so far under their fines and penalties regime, embarked on a new, more aggressive compliance review initiative for small and medium-size business enterprises. They call it “Know Your Customer” and the idea behind it is to make it less easy for criminals, money launderers, or even terrorist groups to squeeze money from honest businesses. Like the Las Vegas casinos, the new HMRC scheme relies on industry experts, called “Champions,” whose intimate familiarity with not-always honest working practices gives them insight into how things get fudged.


The way it usually works is company directors or other top manager will receive a letter from HMRC telling them to expect a visit at such and such time and that key personnel from human resources, payroll, finance, taxes and operations should all be present with all the relevant paperwork, including copies of policies and procedures.

They'll look for anomalies, inconsistencies and once they find them they'll have all the pretext they'll need to dig deeper and if that uncovers more inconsistencies, they'll start proceedings. After that, there will most likely be penalties and fines aplenty, because the presumption will not likely be of innocence.


One of the key areas they will focus on is business mileage claims by both enterprises and their employees who get reimbursed for it. Research has shown  that record-keeping in this latter area has never been terribly accurate. Different recent studies have put the level of mileage over-estimation favoring the employee at between 22 and 25%. Of course the reason mileage records are often so far off isn't simply that people are crooked.


The task is, by its nature, a tricky one and easy for even the pure-hearted to get wrong. You can try to estimate distances driven using Google Maps and still be miles off because it doesn't know all the great little shortcuts which drivers use. The Champions are said to even view any mileage figure ending in a zero or a five as a probable rounding off, which is itself a red flag.

The way the HMRC sees it, a chunk of that heretofore-untaxed overpayment now rightfully belongs to them and they want it, along with interest and a penalty to top it all off.  But as bad as it all sounds, this problem will probably turn out to be short-lived. The reason is that any commercial fleet with up-to-date telematics fitments probably already has, with a little re-jiggering, the capability to provide the necessary mileage data to satisfy the tax hounds when they come by.


Masternaut is a telematics solution provider. According to CEO Martin Hiscox, their systems are modular, focusing on what the customer needs, whether it be track and trace, driver behavior safety, and fleet efficiency. Even though tax reporting had never been among their offerings, exact record-keeping was, and as the details of the new HMRC initiative began coming out, he says some of their customers asked if there was something they could do about it. Hiscox looked into it and realized that the capability was basically already there and with a minimum of tweaking, most of their systems could perform the task.


“So we did a couple of versions of it,” he recalls.

“And then we got PWC to actually come in and audit it. Because you need a sort of stamp of authority that says what we're doing is collecting information in the right manner and presenting it in the right way. Most of our corporate accounts are now taking it as a part of an option, as part of a module within other applications they use with us.”

“The great thing for us is that we were using standard data for private behavior, for track and trace, for proof of delivery, just making it so that it's presented in a manner that's useful to that particular person and the company,” says Hiscox. 


The information that is logged, such as the physical mileage, the time duration, or how the driver was driving  can be interfaced into any number of business applications, such as finance, HR, maintenance, or now, taxation.

Of course, the task is not all cut-and-dried. HPV (hours per vehicle) drivers are already well regulated. “Their (telematics) systems are data-hungry and log every single thing,” he says. Where it starts getting tricky is with the guys who drive the medium and light commercial vehicles. “Sometimes they use the vehicles at weekends for private mileage and sometimes they go back to a depot. So, for these guys it's actually very relevant. Most are being tracked with onboard telematics systems, but the distinction has to get made between business and private mileage.”


Then there are the company cars that are either paid for by the company and owned by the individual or leased by the company. “With those people, you don't necessarily want to track them every minute of the day,” says Hiscox.

“But when you've got guys on the road and it's sometimes two or three times the number of white van fleets you might have, collecting all those expenses is a proverbial pain. Whereas putting in a simple system like that actually allows the same products, the same solution to be used to track those company cars.”


As tough as “Know Your Customer” threatens to be, Hiscox says other European countries, principally Norway and Denmark, have much tougher tax regimes.

He wouldn't say whether he thought tax authorities in other countries would enact tougher taxation regimes on trucking companies. He would say that he expects that within the next few years, the demand for a mileage expense monitoring capability would likely cause OEMs to make it part of their telematics fitment.


For the latest telematics trends, check out Consumer Telematics Show 2015 on January 5 in Las Vegas, Connected Fleets Europe 2015 on March 10-11 in Amsterdam, Telematics India and South Asia 2015 on April 13-14 in India, Insurance Telematics Europe 2015 on April 14-15 in London, Insurance Telematics Canada 2015 on April 23-24 in Toronto, Telematics Berlin 2015 on May 11-12 in Berlin, and TU-Automotive @ Detroit 2015 on June 3-4 in Novi, MI.

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