The majority of business houses require vehicles in their day-to-day working. These vehicles are no less than assets as therefore also have to undergo the audit process just like other regular assets. However, the majority of people are already familiar with the concept and process of auditing. In simple words, auditing is a process of financial inspection concerning the business and its assets. It is a necessary process and is conducted in a specific period.Read More
Auditing is a pretty risky yet mandatory process. Thus, for an uncomplicated and hassle-free process, it is recommended that a business must keep all its documents ready along with the proper evidence and proofs. Other than this, the vehicles that are used in industry are also subjected to fuel audit. As the process is risky, there are a few ways by which one can reduce the amount of risk associated with the business vehicles. Here are a few ways that an organization can follow to take down the risks to a significant extent:
Categorizing the Vehicle
The first and foremost step to do is differentiate the vehicle. According to the central and governing authorities, there are two types of vehicles: passenger vehicles and motor vehicles. The vehicles such as vans, taxis, and pick-up trucks are classified as passenger vehicles. The vehicles that are used 50% for ride-sharing or for carrying passengers, they will be called passenger vehicles. While on the other hand, vehicles used for transporting goods or commodities from one place to another for the majority of their time are termed as motor vehicles.
The only difficulty a vehicle faces when classified as a passenger vehicle is during the lease, interest, and capital expenses. Other than this, there are also times when the majority of employees also utilize the vehicle for personal use along with the business work. The officials thoroughly inspect this during the auditing process.
Devaluing the Paramount Cost
There is a limit on the amount that can be written off, especially in passenger vehicles. There is an utmost limit of $30000, which was established in the last decade by the central authorities. Since then, there has been no change in the limit. Other than this, one can also benefit from claims and returns from the taxable amount. Consequently, this amount can be claimed on the original or actual cost of the vehicle. In this, the present or existing price of the vehicle is not considered. The amount is calculated based on historical data rather than the market price.
Video Credit – Commercial Fleet Financing, Inc.
Standby Cost Advantage
The standby charge is a commonly used term in the auditing process. In simple words, it is a term used to denote the financial benefit that will be included in the income of an individual or an organization. An individual can receive a standby benefit of 24% of the amount equal to the actual or original cost. However, the only condition in receiving this benefit is: the vehicle must be used for professional purposes on a large scale. If it is found that the vehicle is used for personal purposes on a majority scale, then there will be difficulty in receiving this benefit. Other than the above benefit, the employees will also be liable to receive more benefit on the actual cost of the vehicle that the corporation is paying. However, in this case, too, the actual usage of the vehicle will be verified.
Justifying the Usage of Vehicle
The governing and central authorities rely on the evidence and physical paperwork. Thus, it is mandatory for the people or the organization to justify people’s usage with supporting documents that act as evidence. The majority of business houses take support of the logbook. It is a kind of book that the organization utilizes to keep a record of vehicle usage. As keeping a record of the odometer is the primary function, other than that, there are a few more things that must be kept in mind:
- Landing place
- The objective of taking the vehicle
- Distance travelled
With all the necessary information available, the documents will be supported with the required evidence, and thus, complete justification will be available in regard to the vehicle usage. Owing to technological advancement, all this information can be tracked down through GPS trackers or telematics. Thus, vehicle usage records will be easily prepared.
Thus, in a nutshell, one can say that auditing is an important process that has to be undergone by each and every business. However, by taking the proper steps, a company can reduce the risk associated with the business vehicles. Other than this, one can also consult a tax professional in this matter to get a better and clear picture. Auditing is necessary to keep the business out of legal troubles in future which can surely harm your professional reputation and goodwill.