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#1 16-10-09 13:15:38

mrbrightside
Verified Member
From: Doncaster, South Yorkshire
Registered: 07-05-07
Posts: 189

Motor Expenses

After attending a self assesment course Im hoping to get my tax return finally sorted!

Just have a question about motor expenses. There are 2 methods you can choose, and Im just wondering which methods people use?

Method 1- Actual Cost
So this is where you MUST have an annual vehicle mileage record.
So essentially you have 2 numbers. A- Business miles travelled in the year and the B- Total miles for the year.
This gives you (A/B X 100) the proportion of costs to your car attributed to business.

So then you work out your motoring costs- Insurance,Tax, Repairs/Servicing/Fuel etc.

My first question then is- Are franchise fee's classed as a motoring cost?

You can then claim back the percentage (that you worked out before) of your total cost. You also then have to go on and sort out your capital allowances!

Then Method 2 (much easier)- Mileage rate method
This is where you simply claim at a rate of 40p per mile for the first 10,000 miles (25p per mile for every mile over 10,000) You do not claim any capital allowances then

So which method do people use?
Obviously the mileage rate method saves a lot of hassle, but Im not sure Id be better off using it!! Partly because I simply do not understand capital allowances!!


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16-10-09 13:15:38

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Re: Motor Expenses



#2 18-10-09 20:36:08

martin_t
Verified Member
Registered: 30-12-06
Posts: 357

Re: Motor Expenses

Franchise fees are a business expense, not a vehicle expense.
In my first year I went the mileage route - it seemed a better deal.

I haven't decided what to do for the last financial year yet. This is partly because HMR&C, when giving advice as to what is covered by the mileage allowance gave me what I consider to be incorrect information (to my advantage). When making a second attempt to get an answer they were totally useless and basically failed to answer. Can anyone shed any light on this for me? I do intend to ask again, when I can be bothered - probably around Christmas day...

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#3 18-10-09 21:06:31

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Motor Expenses

Hi,
Bear in mind that whichever choice you make has to last for the term you own the car so if you own the same car this year you have to follow the same way of claiming.
  To decide which would be the best option for you look at your mpg and mileage you will be covering, a quick rule of thumb is as long as you cover upwards of 10k a year and get a reasonable mpg claiming the cost per mile route will probably work out more beneficial, lower yearly mileage or very low mpg will result in a lower claim so probably better to go the actual cost route. Capital writedown allowances are calculated separately and altho they may seem attractive always bear in mind that when you sell the car you will have to account for any difference in the sold price and the written down value hence if you have been allowed to claim a huge allowance in your first year and then consequently sell it you will have in effect have a large deficit to be taxed on , something people often don't realise.
As for Martin_T what did the HMRC say was covered on the mileage allowance? they usually only respond to direct closed questions..ie is xyz allowable?

Sue


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#4 18-10-09 21:19:34

kaf
Verified Member
From: Wiltshire
Registered: 05-08-07
Posts: 3,324
Website

Re: Motor Expenses

I agree with Sue.

Work out your MPG and expected mileage. Add in the cost of servicing, tax, insurance, and vehicle cost write down, and see how much you would be likely to claim on an actual cost basis.

Then work out how much you would claim on a mileage basis, 40p for for 10,000 miles then 25p for the rest.

In my case I do 28,000 miles a year, the breakeven point is around 16,000  miles, so every mile above that means the mileage claim makes me better off. In my case @£2,000 per year

BUT.... if fule costs go up a lot then the benefit of the mileage claim reduces.

You have to work it out, or if you have an accountant, get them to do it for you.

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#5 19-10-09 07:47:20

martin_t
Verified Member
Registered: 30-12-06
Posts: 357

Re: Motor Expenses

Ah, interesting replies.  Thanks both!  So it seems that as long as you're not part-time then the mileage route is a no-brainer.  That's good for me as it was the capital allowance stuff that really made me glaze over.  And I glazed over even more when 100% became claimable in the first year...

In my first year I was amazed how little tax I paid even though I was very well occupied with work. I'd been to a tax workshop so had a pretty good idea of what I needed to do, but decided to call the nice taxman to mull over one or two things.  He VOLUNTEERED the information that if I claimed mileage I should also claim insurance, maintenance etc etc - anything that wasn't petrol really.

Surprising? Well, in a previous life as an employee using my car occasionally for business we claimed about 40p/mile.  That was ten or more years ago though, but it was supposed to cover the total cost of running the car for those miles, i.e. a proportional contribution for insurance and maintenance.

I can sort of get that more than petrol could be included in the self-employed mileage rate, like routine maintenance and car washes, but what about things like dual controls, or premature clutch replacement and excessive tyre costs due to the extended time the nearside tyres spend in the gutter with the nails? Where is the line drawn?

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#6 19-10-09 18:20:38

kaf
Verified Member
From: Wiltshire
Registered: 05-08-07
Posts: 3,324
Website

Re: Motor Expenses

I was under the impression that the mileage allowance covered everything to do with the car, tax, insurance, repairs etc.

maybe I will drop a line to my accountant.

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#7 19-10-09 18:27:05

sue martin
Verified Member
From: National area franchises
Registered: 21-01-05
Posts: 333
Website

Re: Motor Expenses

Hi,
Like Kaf l believe mileage allowance includes everything classed as 'running' costs so none of the above will be allowed hence their reluctance to confirm things in a 2nd phonecall , if things are claimed incorrectly you always risk them being picked up during an inspection so it is always advisable to get the name of anyone from the tax office giving any individual advice or preferably get it in writing ( very difficult to get at times!)
Sue


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#8 20-10-09 15:26:44

kaf
Verified Member
From: Wiltshire
Registered: 05-08-07
Posts: 3,324
Website

Re: Motor Expenses

There are other categories you can claim in for some motor costs.

For example, vehicle signing is advertising, dual controls are training equipment.

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#9 20-10-09 20:18:28

FRANKS
Verified Member
From: WALES
Registered: 05-06-06
Posts: 530

Re: Motor Expenses

I use an accountant


Try always to be honest in everthing you do.
Be an 'HONEST BUSINESS PERSON'
Gain respect in ever thing you do

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#10 01-01-10 16:17:29

Hale
Verified Member
From: Reading
Registered: 26-06-05
Posts: 379
Website

Re: Motor Expenses

I use an accountant

So do i, my partner who is one!!


When i say STOP, I can only mean ONE thing!

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#11 01-01-10 21:27:58

golfball13
Verified Member
From: Chelmsford, Brentwood, Essex
Registered: 22-08-07
Posts: 244
Website

Re: Motor Expenses

My understanding of the mileage method of claiming is that it's there to claim for the running costs of the car. Fuel, tax, insurance, servicing.

Like kaf said, things that are unique to our business like dual controls, mirrors, car advertising, etc are claimed for separately.

Rob


RPL Driving
Driving lessons in Chelmsford, Brentwood, Billericay and other areas of Essex

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