How to keep a mileage log: Doing it right

A customer ap­point­ment in another city, the financing dis­cus­sion at the bank, or the trip to the airport before the business trip – many self-employed people and regular employees use a company car for this. As a rule, however, it is not only used for business trips, but also for private purposes. The law sees this as a monetary advantage for which taxes are payable, just as they are for a monetary income. This applies to business owners and self-employed people, as well as employees that are afforded a company car.

The tax office generally assumes that a company car is also used privately to a certain extent, even if the driver has their own vehicle. There are ex­cep­tions only in special cases – for example, if the vehicle is a workshop car or if it can be proven that the vehicle is really only used for business purposes. How the private use of the car is taxed depends on the re­la­tion­ship between private and business use. This, in turn, de­term­ines the com­mer­cial status of this vehicle. Here, the law dis­tin­guishes three pos­sib­il­it­ies:

1. The vehicle is pre­dom­in­antly used for business purposes, i.e. more than 50 percent of the time. Then it is def­in­itely part of the “necessary business assets” of the business (whether it’s a company or you’re self-employed).
2. 10 to 50 percent of the vehicle is used for business purposes. So it can be included as a business asset or operated as a private vehicle.
3. Less than 10 percent of the vehicle is used for business purposes. Then it cannot qualify as a business asset, it is always classed as a private vehicle.

If a vehicle (re­gard­less of whether it is necessary or “arbitrary”) is now included in the business assets, its costs can be deducted from the tax as business expenses. In return, however, its private use must be taxed as a monetary advantage.

The second option for taxing cars used mainly for business purposes is to show the pro­por­tion of business and private use of a company car. This is where the mileage log comes in. In this logbook, you record exactly how often and for how long you drive the car for business and private purposes. From this, the duration and frequency of business use and private use can be derived as a monetary advantage. The basis for the cal­cu­la­tion is not a (possibly fic­ti­tious) new price of the vehicle, but the actual total ex­pendit­ure.

Keeping a mileage log is, in many cases, more tax-efficient than claiming actual expenses, but requires a certain amount of effort. The law places re­l­at­ively strict re­quire­ments on such a protocol. Ac­cord­ingly, the mileage log should be “orderly.” The HMRC has de­term­ined what this means as follows: A mileage log must be kept promptly (i.e. con­tinu­ously) and in a closed form, and must show the journeys un­der­taken in full and con­tinu­ously, including the mileage reached at the end of each journey. At least the following in­form­a­tion must be provided:

• The date and mileage at the beginning and end of each in­di­vidu­al trip
• Des­tin­a­tion and itinerary (in the event of detours)
• Travel purpose and business partners visited

You are required to record the details of both business and private trips in a logbook. You must do this legibly, promptly, com­pletely, and trans­par­ently. The date should be exact, i.e. must not be rounded up or down or entered sub­sequently for several days. If changes are necessary (errors can happen, after all), the change must remain clearly visible.

It is important that you also list the details for fre­quently repeated trips. Sim­pli­fied doc­u­ment­a­tion is not suf­fi­cient. However, time is an optional entry and does not have to be entered.

The above guidelines must be followed if you want to maintain your logbook properly. In addition, the same must not just be a col­lec­tion of in­di­vidu­al sheets: a closed form is required. This applies to both the paper form (book or booklet) and to elec­tron­ic mileage logs.

Are there ex­cep­tions when it comes to recording ob­lig­a­tions?

There are ex­cep­tions for certain pro­fes­sion­al groups when it comes to recording ob­lig­a­tions. They are not required to provide such detailed journey in­form­a­tion. These include:

• Com­mer­cial vehicle drivers
• Driving in­struct­ors
• Car rental operators
• Taxi drivers
• Courier drivers

The reason for there being reduced re­quire­ments is the dis­pro­por­tion­ately high effort per trip in these instances. It is assumed that the op­er­a­tion­al reasons for journeys and the scope of private journeys are suf­fi­ciently explained and can be checked. Taxi drivers, for example, only have to write the mileage in their driver’s logbook at the beginning and end of their workday. In the case of driving in­struct­ors, a reference for the training trip as well as the cor­res­pond­ing mileage at the beginning and end of the journey are suf­fi­cient.

For the doc­u­ment­a­tion of private journeys, the rules are less strict. Simple mileage in­form­a­tion is suf­fi­cient. A short note in the mileage log is enough for journeys between home and the workplace.

In principle, however, a separate logbook must be kept for each vehicle. The necessary in­form­a­tion in the logbook includes the re­gis­tra­tion number and the mileage at the beginning and end of the year or at the beginning and end of vehicle use. If the vehicle is used by more than one person, the re­spect­ive driver must also be entered for each trip.

Here you can find a checklist for your logbook:

• A separate mileage log must be kept for each vehicle
• The mileage log must have a closed format
• The official vehicle re­gis­tra­tion number and mileage at the beginning and end of the year or the period of use must be entered in the logbook
• Each in­di­vidu­al journey must be entered with the mileage at the beginning and end, the distance covered, and a reference to the reason for the journey
• If several drivers use the car, then the re­spect­ive names must also be entered for the in­di­vidu­al journeys
• Entries must be clear and legible
• Doc­u­ment­a­tion must be timely and chro­no­lo­gic­al; data must not be entered in bundled form
• The figures must be exact and may not be rounded up
• Sub­sequent changes are only permitted to a limited extent and must be re­cog­nis­able

Have you decided to keep a mileage log? Then you are faced with another decision: Which logging method should you use?

• Mileage log in paper form
• Mileage log in elec­tron­ic form

A paper logbook is the classic choice. You can purchase one at your local office supply shop, or create one yourself. Online, there are many mileage log templates. It can easily be stowed in the glove com­part­ment so it’s always at hand and can be filled out before the start of the journey and again after arrival. Of course, you can also keep an Excel spread­sheet for your own stat­ist­ics – however, you cannot present it to the tax au­thor­it­ies as a mileage log.

In our digital times, it is of course also possible to keep an elec­tron­ic mileage log. Smart­phone apps determine the vehicle position using GPS and auto­mat­ic­ally document the distances covered. If the app records the date, mileage, and des­tin­a­tion, the le­gis­lat­or even allows you to add the reason for the trip up to a week later. With the manual mileage log method, on the other hand, you cannot do this. Another advantage is that these apps are re­l­at­ively in­ex­pens­ive or even free of charge.

However, it should be re­membered that incorrect doc­u­ment­a­tion does not excuse a faulty mileage log. Use the elec­tron­ic version only if you can use it correctly. Otherwise, there is a risk of problems with the tax office.

As an al­tern­at­ive to smart­phone apps, there are also elec­tron­ic driver’s mileage logs that are per­man­ently installed in the vehicle or can be plugged into an on-board socket in the car.

Mileage logs should be submitted with tax returns, and may be checked at the dis­cre­tion of the IRS. Entries will then be checked for plaus­ib­il­ity, for example, by comparing them to other in­form­a­tion provided in your tax return. The place and date of workshop visits and expense reports should match in­form­a­tion provided in the mileage log. If the HMRC finds dis­crep­an­cies, it can reject the mileage log and conduct an audit. A de­lib­er­ate falsi­fic­a­tion of the driver’s logbook can also result in a tax evasion fine.

When claiming business vehicle de­duc­tions on your tax return, you also have the option of deducting actual vehicle expenses. Actual expenses cannot be claimed if you are using a mileage log already. Deducting actual expenses requires you to keep records and receipts of all costs con­cern­ing the vehicle, from general main­ten­ance to repairs. In order to find out which of the two methods is better for you from a taxation point of view, you should conduct a com­par­is­on of how many business miles were driven vs. how much money was spent on the vehicle through­out the tax year.

Please note the legal dis­claim­er relating to this article.