Hi Richard,

valentines day... bah humbug....

Before reading the following please do not construe this as tax advice but rather as a pointer to seek additional qualified assistance in this area for your client.

I'm more limited companies than sole traders but from what you've written you seem to be merging two quite different schemes.

to claim mileage the client needs to have a record of every business trip taken with associated business mileage.

The journeys must have been incurred wholly and exclusively on company business.

The 40p per mile for the first 10k business miles (25p per mile thereafter) is intended as compensation as using one's own car on company business. However, if the car had been hired privately then this would also be applicable.

If the car is hired by the company then the 40p/25p is NOT applicable.

To all intent and purpose the hire car seems to be the equivalent of a company car. (Hired through the company for the benefit of the employee). Therefore personal car benefit would be payable based on the car emissions and cost of the car when new.

The benefit calculation for private mileage fuel benefit per FA2009 is £16,900 * Co2 emissions percentage for the car. No reduction is given for reimbursements by the individual towards the cost of Petrol so there is no point making any. In many cases the fuel benefit may cost your client more than the actual fuel consumed!

If the hire car is available for only a percentage of the year then calculate the fuel and car benefit on the same percentage rather than the full 12 months.

With hire cars there is the 15% usage rule but my belief was always that such was for short term emergency hire rather than long term arrangements that to all intent and purpose seem to be a long term leasing agreement. (Which falls into substance over form).

The owner really needs to consult with their accountant on this as the way that they are going about matters does not seem very cost effective.

Sorry, appreciate that this isn't a perfect answer but its a starting point.

cheers,

Shaun.

Hi Richard,

completely correct on the first part. (40p per mile replacing the petrol receipts).

On the second part the lease and running costs would go through the business but it would be a benefit to the director / owner / employee so they would suffer the adjustment to their personal tax situation.

The car would be a benefit based on cost when new and Co2 emmissions.

Fuel benefit is always £16,900 * the same percentage used for the car.

No reimbursement by the director /owner / employee to the company in respect of fuel costs has any effect of the calculated fuel benefit so there is no point making any.

The benefit is allocated on the basis of the amount of the year that the benefit was available.

Lets take an example of a 2500cc petrol driven car with a list price of £24k. Emissions are 257gms/km. Car was available from July to April.

Servicing £450,
Insurance £780,
Maintenance £240,
Fuel £2500 (of which £1150 was for business purposes, £900 reimbursed to company).

The calculated benefit would be :

Car benefit (£24k * 35% * 9/12)            £6300

Fuel Benefit (£16,900 * 35% * 9/12)      £4436

Assessable benefit                                  £10,736

Note that the servicing, insurance and maintenance are not reflected in the assessable benefit. However £2500 in fuel has attracted a benefit of £4436 and the £900 reimbursed has no effect upon the calculation.

Personally I always go the 40p per mile route but it really depends on the other costs and you need to calculate it out using both methods to see which is best in your clients situation.

hope that this helps,

Shaun.

Correctamundo...

hope that this clears up the confusion. I noticed you also posted on another thread but thought that I might confuse matters by answering both.

Good luck with explaining this one to your client, from past experience I've found that they just wave a bag of receipts at you and expect you to wave a magic wand over their failings making everything ok.

In this instance the client seems to be treating the bookkeeper as an accountant and you need to be careful from your PII cover perspective that you do not stray into giving tax advice for which you may not be covered.

Shaun

Hi Laura,

The 40p/25p is reimbursement for use of the employee's / directors own car on company business.

The business mileage is recorded in a small book normally kept in the car. Periodically the miles are tallied and for each mile done the relevant amount is reimbursed by the company.

The books themselves may make note of the actual miles but the miles are not as such recorded in the companies books rather there will be payments made that come under motoring expenses.

The mileage record must be available for inspection by HMRC should they request evidence that a log of miles is being kept.

From the employee / directors perspective so long as the rates are not breached then the payments are a non P11D item.

Hope that this answers the question,

cheers,

Shaun.

Hi Laura,

No probs.

As you state

The receipts are unnecessary and a record must be kept of the actual business mileage.

So yep, less invoices to type into the system!

glad to be of assistance.

Shaun.

Hi Matty,

In your case I would put through the full amount of the fuel receipts. This is on the assumption that it is classed as 'the clubs' van and is not used privately.

Hi Sarah,

welcome to the forum.

The rate is now 45p/25p rather than 40p/25p. However, you state that your father is self employed and VAT registered meaning that the mileage route is not available to him (Assuming that VAT registration is because he has passed the VAT registration threshold rather than voluntary registration with lesser turnover).

To use the mileage route rather than putting the vehicles through the company he would need to incorporate the business which of course opens up a whole different set of questions. That decision is down to your father and his accountant to decide and is not something to be entered into lightly.

The rules are that if have breached the VAT registration threshold then on change of car you are no longer able to claim mileage. As your Father has not been claiming mileage in the past then he will be unable to convert to it now.

HTH,

Shaun.