Introduction to this document

Memo: invoices for motor expenses

How expenses are controlled is always at the top of HMRC’s list of questions during a compliance visit. Using our memo should help you to dismiss enquiries about motor expenses very quickly, before they become too detailed.

Compliance visit

A compliance visit is often referred to as a PAYE visit, i.e. an inspection of your books and records centred around your payroll but specifically trying to unearth, as yet, untaxed payments and benefits in kind. The inspectors will ask for a full list of the current balances on your nominal ledger, and then for an analysis of what has been posted to accounts, such as cleaning, repairs, motor expenses, entertainment, etc. They are looking for hidden payments to, or benefits for, employees. This is where having a computerised accounts system can come in handy and you can simply print out what’s in there. They will also trust you to get any invoices they are interested in looking at.

Cover yourself

As a rule of thumb, every invoice relating to a company car needs to be in the name of the employer for it to receive a tax deduction for the expense. It will save problems later if you make this issue clear to employees, you can use our Memo: Invoices for Motor Expenses for this purpose. Following this up with a review of all motor expenses invoices over, say, £300 should limit your tax exposure to this sort of error. If you do find a mistake, send a copy of the invoice back to the supplier and ask for one in the company’s name.