I have been told that if your car is used for business, it is possible to claim 40p per mile for the first 10,000 miles and 25p per mile subsequently, instead of claiming the money spent on fuel.
Has anyone in the BR had any experience of this?
My contact tells me that it is box 3.55 in the self-employed section of the tax return. However, I understand that fuel costs go in box 3.46 - cost of sales.
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You can claim the tax back on the difference your employer pays vs what HMRC allows as a max allowance. You still need to claim for mileage from your employer. This is also for those providing their own car with an allowance in lieu of a company vehicle.
How it works is for the first 10k miles your employer could pay 40p/mile and 25p/mile for the rest. So you claim the tax back on the difference.
For someone getting say 12p/mile, driving 15,000 miles and a higher rate tax payer then the following equation should help explain:
Tax back = (( 40 - 12) / 100 x 10000) + (25 - 12) / 100 x 5000) x 40% = £1380
Hope this helps
Rob
P.S. Goes without saying you claim at the end of the year and can claim back for previous years. BUT the method is filling in a full tax return.
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Thanks for that Rob. However I am self-employed, my profile will make things clearer. Does that alter the calculations above?
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How do you currently handle the vehicle ownership and costs thing?
I have only done stuff as a director of a ltd co. but I always understood that a sole trader could get a much better deal on the tax side of things - more or less claim the entire vehicle as a cost and claim the miles as well.
Accountingweb.co.uk is about the best resource for accounting/tax type queries. What does your accountant say?
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There was a thread on this some while a go. IIRC the simplified method as above can only be used if your turnover is below the Vat limit. It takes ALL of your running costs into account . Fuel, depreciation,tax, insurance, tryes, servicing etc. you cannot change your method from year to year, only when you change vehicle. So if you are currently claiming all or a percentage of your total costs on a particular vehicle I think you have to carry on with this.
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For self-employed I have to admit I have no idea. Sure there are other rules that apply for claiming back VAT and income tax in this case.
Hope someone in the know comes along soon.
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Thank you for those responses. the more I look I into it, the more I feel inclined to stay with my tried and tested method that I have used for several years.
The various points made above and the downloading of The Revenue's Help Sheet have cliched it for me.
Thanks again
Don
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If you are vat registered and have not claimed back vat on fuel you can go back 4 years. There is a chart on the hmrc web site that gives the fuel element of the approved mileage rate - it worked out between 1 and 2p/mile that you could get back. - but check the details.
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Don
If you are self employed and your turnover is less that the VAT registration threshold (£60,000 for y/e 05.04.06) you may calculate your motor expenses for each business mile using the rates you have mentioned. The resulting figure needs to be entered in box 3.55
No other motor expenses (other than interest on a loan to purchase the vehicle) are to be claimed and no capital allowances for the vehicle. Any change from an traditional 'actual' basis takes place only when one vehicle is replaced by another.
It's all in Help Sheet IR222
www.hmrc.gov.uk/helpsheets/ir222.pdf
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The interest on any loan used to buy a vehicle is NOT reclaimable.
It used to be but is no longer - the 40p covers all costs.
Incidently, if you use the alternative true cost (actual fuel,repairs, tax, depreciation, interset etc) you have to disallow a portion for private use of the car.
If you use your own car and your employer pays less than the 40p, you can reclaim the balance but you only get your marginal rate of tax back on that claim NOT the full difference.
So, if your employer underpays you by £1,000 a year and you are 22% tax payer, you get £220 back from the revenue, not £1,000 (assuming you have paid £220 tax in the year). Otherwise all employers would only pay 5p a mile and be saying "claim the rest back from the Revenue" wouldn't they?
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The interest on any loan used to buy a vehicle is NOT reclaimable
Oh yes it is - if you are self employed. It isn't claimable if employed however.
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but it isn't if you claim the 40p/25p rates whilst self employed ...
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Now you've tot me worried hxj. Are you sure? I thought the only time you couldn't claim car finance costs was when employed. ie: even if claiming on business miles basis, the business proportion of finance costs can be claimed by the self employed. (i hope so for sake of my clients!)
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but it isn't if you claim the 40p/25p rates whilst self employed ...
I believe hxj is correct. I am self-employed (as well as being employed and retired, but we won't go into that!). AFAIK the 40p/25p rates are supposed to include EVERYTHING to do with the running of the vehicle - it's there as a simpler alternative to breaking down all the various components of the running costs of the car. The choice of which method to use is down to the individual and their particular circumstances. As I'd got an old car with no finance owing etc, I opted to use the 40p/25p simple system.
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hxj
It's in the current HMRC help sheet IR222 for the self employed - use of mileage rates to calculate motor expenses ' no other motoring expenses (other than interest on a loan used to purchase the vehicle) are claimed'
Perhaps you'd like to reconsider your answer.
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Sorry to bend the subject a little but does anyone have experience of claiming the 40p/mile when the trip is a mixture of business and pleasure?
A helpful 'technician' at the IR helpline said to calculate the business-related portion of the time spent on the trip,
but I forgot to ask whether sleeping time is included.
So to give an example, if I spend 24 hours away from home, stay overnight in a hotel, spend 2 hours on business, the rest on pleasure, do I claim 2/24ths of the miles, or 2/16ths (assuming 8 hours asleep)? I'm self employed.
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Stokie
hxj may be able to give you the Revenue's opinion on this, but in my experience, if an inspector enquires if a deduction for expenses is correct they do have some discretion and are quite reasonable if you are too. If the mileage was on a trip that was a mixture of business and pleasure, I'd be inclined to claim 50% of the mileage expenses.
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Paul, many thanks for the advice, seems reasonable. I'm filling out my first ever tax return.
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It really depends upon the reason why the trip was undertaken.
For example I have a client appointment on the South Coast and arrange it for a Friday afternoon in half-term. I then drive the family down Friday morning, drop them at the in-laws, do the meeting, then spend the weekend at the in-laws, driving back Sunday evening. All the mileage is business.
If I do the above, but pop in to see a client on spec (rather than having arranged the meeting before the private element) that would be all private.
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I'm sure it's no help whatsoever but I am an employee, but officially home based.
The company pays me a car allowance with my salary (therefore taxed as income) and gives me a fuel card for all fuel purchases (private and business) but no other allowance for use of car on business.
On the advice of the tax man I claim the 40p/25p for every business mile but show the total value of fuel received as income from my employer (can't remember the exact box, could look it up if anyone wants to know), which means that I'm not getting the portion of 40p which is devoted to fuel.
I expect I'm losing out somewhere but I started the tax return at the weekend and this year's tax rebate looks around £1k which is a nice windfall.
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Smokie
If your employer provides you with a fuel card (and pays for the fuel), the cost of fuel provided should be included on your P11D as a benefit in kind. Make sure you are not including the value of fuel received twice!
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Yep, it appears as a b-i-k (the whole amount, business & private)
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I have reconsidered my answer and it is deficient :-)
Oh well at least a couple of clients will be getting an unexpected tax refund!
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hxj
The interesting question is - why can the self employed claim interest plus pence per mile rates and employees can't? Do you think it's something that's just been 'overlooked'?
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The interest on any loan used to buy a vehicle is NOT reclaimable. It used to be but is no longer - the 40p covers all costs.
Help Sheet IR222 from those very nice people at the Revenue covers all of this. For SELF-EMPLOYED people (please excuse the shouting) if you take the mileage rate scheme:-
I quote:
no other motoring expenses (other than interest on a loan used to purchase the vehicle) are claimed and no capital allowances are claimed on the vehicle (since AMAPs rates already contain an element to allow for depreciation)
What all that means for EMPLOYED people I have no idea.
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