Vince

Dont think what you are saying is right.  The 45p per mile is to cover all the costs of using the individuals car.  Not just the fuel.  So you cant claim repairs, insurance etc on top of the 45p.  I think the out of the 45p per mile the actual fuel element is only something like 16p.

So if you are self employed you can either put through 45p per mile or claim all the expenses and then disallow a proportion for personal use in the tax comp.  If your turnover is above the VAT threshold limit then you cant use the 45p per mile option.

If is a limited company then you can charge the company 45p per mile for business use of the employee's own car.  If the company wants to claim the running costs then it has to own the vehicle it can then claim the costs but will be a benefit in kind on the employee if any private use.

Regards

MarkS

-- Edited by MarkS on Wednesday 23rd of May 2012 03:47:37 PM

Mark: Until recently, I applied the same logic as you. But when I spotted the wording on HMRC's website - not just the link I gave, I think it's similar elsewhere - I spent a long time thinking about it, re-reading it, etc, until I decided to do what I'm now doing.

Edit: A bit of re-wording above, and the following just to clarify...

"Reclaiming VAT on repairs and maintenance

You can reclaim all the VAT you're charged on repairs and maintenance to a vehicle so long as:

• the vehicle is used to some extent for business purposes
• the business pays for the work to be done

It doesn't matter if the car is used for private motoring or if you've decided not to reclaim the VAT on road fuel for business travel.

But you can't reclaim the VAT on vehicle repairs and maintenance if you use the vehicle only for your own private motoring."

The key points here: "You can claim all of the VAT ... so long as ... the vehicle is used to some extent for business purposes" and "It doesn't matter if ... you've decided not to reclaim the VAT on road fuel for business travel"

If the mileage covers this as well, then there are two issues.

1) Given that you can only claim back the VAT on the fuel element of the mileage, then it doesn't take into account the VAT on repairs, which the above clearly states you are entitled to reclaim the whole amount of.

2) Even if there was some way to get the VAT on repairs through the mileage, the mileage is designed to only account for business mileage, and would therefore only cover a proportion of the repairs based on that - but, again, they clearly state you can reclaim it all.

Mileage alone therefore can't possibly cover it the repairs.

I believe HMRC are fairly pragmatic about vehicle use, but that page probably isn't entirely clear. This may be a factor in why so many people don't do what I'm doing (which is probably what they hope for, TBH) - but I firmly I am entitled to do what I do based on what HMRC themselves have said on their website.

 

-- Edited by VinceH on Wednesday 23rd of May 2012 04:49:50 PM

Vince, when you say 'it's my business and my car' what do you mean, are you self employed or a company director?

Have a look here: http://www.hmrc.gov.uk/incometax/relief-self-emp.htm from which I quote:

Expenditure for a mixed private and business purpose is non-allowable expenditure. An example would be the cost of travelling to town to bank the business takings and do your private shopping at the same time.
If you can separate the expenditure between business and private purposes, the business part is allowable. So, if you use a car separately for business and private purposes, the proportion of the expenses that relates to:
business use is allowable
private use is non-allowable
You normally work out the allowable business and non-allowable private proportions based on the mileage covered for each.

So you can see that one of the underlying principes whatever expense we're talking about is that you can only claim for the business portion of an expense that is part personal and part business.

Further down on the same page it says:

You can deduct the cost of using your car for business purposes. There are two ways of working out how much you can deduct:
a fixed rate for each mile travelled on business, using our fixed mileage rates
the actual expenses, worked out using detailed records of business and private mileage to apportion your recorded expenditure

So it is very clear that you EITHER claim mileage or actual expenses, not both. So you cannot possibly claim mileage and the VAT on the actual expenses.

Now let's assume you are a company director. If the company owns the car, then it's simple, the company can pay it all and reclaim the VAT on repairs etc BUT as an employee you have a benefit in kind, on which you are taxed.

Or else you use your own car in which case you are treated like any other employee and can be paid mileage at the allowable rate ONLY without tax implications. Your employer ie your company could chose to pay your motoring costs ***but if it does this is a taxable benefit in kind***. I can't find a link to show that the VAT isn't reclaimable at the moment, but you've said: 'I take it to mean when the business or business owner owns the vehicle.' If you're a company director then I think this is an erroneous assumption, I can't find a link to show this at the moment but a phone call to HMRC would soon clear it up (well, hopefully). It is a basic legal fact that a business is a separate legal entity to it's directors, shareholders and employees and whilst a shareholder can be said to own a company, paying a shareholder's motoring expenses is not a valid business expense!

I really don't think that HMRC tend to be pragmatic about this sort of thing, it is all pretty clear and to claim back expenses or input VAT that you aren't entitled to is either genuine mistake or - if you're aware that they aren't correct - tax avoidance and fraud. Either way, you're looking at fines and interest on the underpayment of tax.

-- Edited by RuthA on Wednesday 23rd of May 2012 07:34:32 PM

MarkS wrote:

---

If your turnover is above the VAT threshold limit then you cant use the 45p per mile option.

---

 Hi Mark,

I just wanted to clarify this.  If you are above the VAT threshold then you're right, you cant choose the 45p per mile option.  But if you choose this and go above the threshold you must stick to this option until you change vehicle.  If you voluntarily regisster for VAT you can still choose the 45p option as long as your turnover is below the threshold.

I know you probably know this Mark, it's just for the benefit of others reading this.

Kris

As I said I was sure you'd be aware, but you'll realise that others reading the forum are not always aware of everything (I include myself in there too). Often you can write something like "turnover above the VAT threshold limit" and people see it as interchangeable with "VAT registered". I'm sure you've seen this as well as I have.

Kris

Oops, editing my post for a bit more detail while you replied. :)

Hopefully, the expanded explanation above makes my point clear.

No still stand by my understanding.

The website refererence is surely to when the business owns the vehcile not the individual.

Think will go and speak to my boss and see if he wants to put the costs of my car through the business, and reclaim the VAT therefore only incurring 5/6 of the costs then we can split the VAT 50/50.  So on a £300 bill he will pay £250 (net).  I will pay him £275 for the work and we are both £25 better off than if i paid for the work personally.

Regards

MarkS

Hi Vince,

Sorry, I agree with Marks stance on this.

the mileage rate is compensation for use of your own vehicle, It is instead of running the car through the company. You can only do one or the other.

As you correctly identify, the VAT can be reclaimed by the company on the percentage of the mileage payment related to petrol.

The rate of 45p per mile is total compensation for the use of an employee's vehicle. The person cannot claim mileage and have their expenses paid as that is efectively paying the same compensation twice.

kind regards,

Shaun.

P.S. Just read your link and there is nothing in there to indicate that my statement is incorrect.

P.S.2 very much on top of this one at the moment as I've spent the first part of the afternoon "Reprogramming" a client who was basically trying to do exactly that. Claim expenses AND mileage.... Had real difficulty trying to get through to them that if the company owns the car and they own the company that does not equate to the car belonging to them. (I appreciate that it sort of does but I didn't want to confuse them by introducing an element of truth into their arguement).

P.S.3 That one ended with me telling them that they had a tax liability which didn't go down at all well as they seem to be under the impression that they either have an accountant / bookkeeper, or pay tax, but not both. First year with this client. Suspect that it will be my last as got the "I've never been spoken to like that before" speech to which my retort was "Maybe if you had been you wouldn't have got yourself into this mess".... I really must start having these conversations with clients after I've got their money! lol

Shaun, as I said, I believe HMRC tend to be pragmatic about this sort of thing.

As far as my interpretation of the published information is concerned, I stand by it and will continue to operate on that basis in my accounts.

To be fair, taking my interpretation at its simplest, it would be open to abuse: someone could just do a few miles in a car for business use, and then reclaim a year's worth of VAT on repairs - if that happened, and HMRC got wind of it, then the person would deserve a big slap.

Hopefully someone like Robert Pearce will be able to provide the relevant legislation guide to confirm my interpretation.

At the end of the day HMRC website is just guidance and reference should be made to statute which is even more complicated to understand than the website guidance.

Regards

MarkS

Hi,

the 45p/25p is a payment to you the director.

It is an expense of the company so it's

Dr Motor Expenses

The money is a payment to you the director so yes, you can go via the directors loan account is you are parking it for a while or you can make payment directly to you personal bank account.

The point is that you are paying an expense to yourself.

The VAT is a quite miniscule amount and most directors don't bother with it. It's not VAT on the 45p, it's VAT on the apportionment of the 45p related to fuel (there are other threads on the site related to this calculation). Basically it just means that there could be a little relief for the company on the money that it is paying to you in compensation for using your own car.

Taking your case that you don't want to take the money immediately but have decided to take the money to the DLA.

So it's

Dr Motor Expenses
Cr DLA

Then later you will

Cr Bank (payment to you)
Dr DLA

Running a little ruffshod over some of the other posts in this thread (and echoing more the posts of Louise, Mark and Kris) I just want to emphasise, you are paying yourself the 45p/25p per mile for use of your own car for which YOU pay all expenses.... That's it, there are absolutely no other payments (except parking).

The VAT related to repairs where you are claiming mileage is not born by the company as it was not down to the company to repair your car where it was down to the company to provide fuel for the miles done on company business which is why there is a small amount of VAT that could be reclaimed.

HTH,

Shaun.

Quoting Shaun:

"Running a little ruffshod over some of the other posts in this thread (and echoing more the posts of Louise, Mark and Kris) I just want to emphasise, you are paying yourself the 45p/25p per mile for use of your own car for which YOU pay all expenses.... That's it, there are absolutely no other payments (except parking).

The VAT related to repairs where you are claiming mileage is not born by the company as it was not down to the company to repair your car where it was down to the company to provide fuel for the miles done on company business which is why there is a small amount of VAT that could be reclaimed."

I'll just add here that this is obviously an area where there is some disagreement, so it should probably be taken here as a case of "Do what they say, and not as I do." - I'm quite prepared to argue my case with HMRC if I need to, which other people would be less inclined to do.

Ruth:

"The 'you' refers to the VAT registered business which owns the vehicle."

That would be 'me' then: to answer the question put in your first post, I am a sole trader.

As far as the link you posted is concerned: http://www.hmrc.gov.uk/incometax/relief-self-emp.htm

Yes, that's saying to apportion the costs according to the mileage - so I was wrong on that point, but that's not for the VAT, which is what the majority of the thread since I made the first comment has been about. At least that's the point I've been making since, anyway. (And please note that in my first post, I only said I was fairly certain, anyway. I remain so about the VAT, even though you've corrected me as regards income tax.)

For what it's worth - and perhaps I should have mentioned this - I have two cars. Although it's shortly to be only one for a (hopefully short) period. One of them is used for business purposes, with a modicum of unavoidable personal mileage, the other is used for personal purposes with a modicum of unavoidable business mileage. (Slightly more when it's nice and sunny because I'd rather drive the soft top unless I need to use the bigger vehicle - I'll avoid sitting in a greenhouse if I can!)

Now, here's the good bit - or if we pretend this is a shampoo advert, the science bit:

For the car mainly used for business, I claim the VAT on the fuel element of the mileage, and the VAT on ALL the repairs and maintenance - what little there is (a recent expensive new clutch and unexpectedly expensive MOT test aside). There is very little personal mileage, so, for my tax return, judging by that link you provided, it looks as though I've claimed too much on my repairs. At an estimate, though, I should probably declare an additional fifty to one hundred quid at most for that. Oops.

(Note the post further up in reply to Mark where I said "Until recently..." - what that means is that until recently, I wasn't putting any repairs and maintenance through my books, and I haven't gone back and taken into account any from before I started doing this, which I think I could.)

For the other car, I claim back the mileage only - none of the repairs have gone through the books, not even for the VAT. The simple reason is that I do consider it a personal vehicle, and it does much less business mileage. I take the view on this one that it does little enough that claiming the VAT would be... well, again, refer to a post I made further up, this time in reply to Shaun, whereby I suggested just doing a few business miles and then reclaiming all of the VAT on any repairs would be an abuse of what HMRC's guidelines say. I say HMRC are pragmatic about this sort of thing - but so am I; I'd feel I was abusing it if I claimed for this vehicle.

That said, in practice I probably do enough business miles in it that I might have a good case to argue for the VAT (not much of a social life, see) but I've never looked at it for any more than a month at a time. Even so, there's certainly enough that if I apportioned the repairs according to the mileage I'd be countering the £50-£100 I maybe should have taken off the other vehicle's repairs with a several hundred quid amount that could be put through for this one - probably more; it's been a very expensive car to maintain (one of the reasons I'm getting shot of it).

And on top of that, I've never updated the spreadsheet form I use to calculate the mileage - well, I have in other respects, just not this one: It's still based on 40p/mile, not 45p.

Overall, therefore, I do what HMRC tell me I should - but because I try to take a reasonable (ie pragmatic) approach to it where the 'personal' car is concerned, if anything I've overpaid my tax rather than underpaid it.

(Not this year, though: I've been reducing my workload and the net result is that I'm not earning enough to pay any tax anyway after the more direct and straightforward expenses are taken into account.)

So, to quote you again:

"it is all pretty clear and to claim back expenses or input VAT that you aren't entitled to is either genuine mistake or - if you're aware that they aren't correct - tax avoidance and fraud. Either way, you're looking at fines and interest on the underpayment of tax."

A mistake, possibly (see the start of this post), but certainly not tax avoidance and fraud - unless they really feel it's a good use of taxpayer money to take me to court for giving them too much money.

Incidentally, when you say HMRC don't tend to be pragmatic about this sort of thing - you do realise the word means to deal with things in a sensible, realistic and practical way, don't you? Only on one occasion have I ever found them not to be pragmatic.

Vince

Given you are a sole trader then as you as an individual and as a business at treated as the one legal entity.

On that basis you are entitled to either charge the business 45p per business mile or the business can claim treat all the costs as paid by it and reclaim the VAT but any private use % should be disallowed in the tax comp and any private use element of VAT not reclaimed.

Thats how it has always been in 15 years pratice with 6 different CA firms so unlikely that they are all wrong and you are right.  Though it you can argue your case then go for it but personally i wont be advising any of my clients to adopt that method and hopefully you are not either,

Regards

MarkS

Sorry Mark,

we crossed in the post, wasn't ignoring you.

I was going to edit the last part of that post, but it doesn't seem to be very practical on this tablet. Following it up is easier...

Firstly, note to self - reading any new posts, and replying at well gone midnight, is going to lead to misreads. Don't do it. (In which case, what the hell am i doing now?)

The point in question - my reply to the bit about giving advice to clients. I responded re the nature of my first comment here. As far as clients are concerned - and especially re tax - I give no advice at all other than "speak to so and so" in the unlikely event they ask for any. I openly admit my knowledge of tax is only good enough for my own accounts (and as this thread shows, even that may not be so). My clients know this. They use me because I'm cheap, efficient - and can make the likes of Sage sing.

Grrr, thought so : for some reason I had a stray "but you can't" before the paragraph, which I deleted, and wanted to re-read it to see if it was missing. It was - from the beginning of the final sentence, which should be the last sentence of the first quote. That sentence is irrelevant to the exercise anyway, though.

VinceH wrote:

---

Incidentally, when you say HMRC don't tend to be pragmatic about this sort of thing - you do realise the word means to deal with things in a sensible, realistic and practical way, don't you? Only on one occasion have I ever found them not to be pragmatic.

---

 Yes I do, thank you. And I still don't think it describes HMRC!!!!!

I did. Here: http://www.book-keepers.org.uk/t48619037/aaarrrggghhhh-hmrc-what-are-you-doing-to-me/

Hi There

The current VAT reg threshold is £77k so provided your turnover is less than 45p per mile you can use this option to recharge the company for business mileage in a personal car.

Up to you how often you wish to charge the company but most clients that i have dealt with usually charge the client on a quarterly basis.

You would need to keep accounting records to support the charge which is easiest to probably keep on an excel spreadsheet to include the following

Date of trip

Purpose of trip

Total business mileage

Then at the end of each quarter you would total up the mileage and multiply by £0.45 to work out the charge to the company.  So for example say you have in the quarter a total business mileage of 500 miles then you can recharge the company £225 (£0.45 x 500).  Which you would enter as

Dr Motor Expenses £225

Cr Directors Loan/Other Loan   £225

You can off course reclaim the VAT on the fuel element of the 45p but cant remember of the top of my head how much the fuel makes up of the 45p.  Perhaps someone else can confirm.

 

Regards

 

MarkS

Hi Peasie

Dont think so as it refers to company cars.

But think would be a reasonable starting point when working out the fuel element. 

I would expect that if a fixed 45p per mile is allowed then the fuel element would be a fixed amount and not variable depending on engine size.

Maybe there isnt a fuel element that you can reclaim VAT as i have only ever seen it entered in accounts at the 45p level (previously 40p) with no adjustment for VAT

Regards

MarkS

Oh, that's already been posted between my copying it here, wandering off, then coming back to post.

Site says that I was last to post but my message isn't showing at all?

Just seeing if this second message promts it back out of the ether.

 

 

.... Yep, there it is.

Strange, never seen the site do that before.

-- Edited by Shamus on Thursday 24th of May 2012 11:06:27 PM

That's the document I was quoting - the url is in a post further up.