When it comes to claiming car expenses i understand it can be done at 40p per mile or as a percentage of business use in which all running costs can be taken into account.
My client bought a car on finance last year but is only due to start working as self employed shortly. How would i account for this with regards to paperwork so that i can adjust for depreciation etc. Can i use the HP inovice even though it will not be within the accounting year???
As much info on this topic (start to finish) would be great!
Thanks
Lisa
-- Edited by lisasabin on Thursday 30th of September 2010 10:06:06 PM
Mileage: anything that's not 'normal commuting' can have 40p per mile charged, yes. Or business use so long as the calculation of that is well-founded and well documented.
Vehicle: Is your client a sole trader/partner or a limited company? As this can change whether you want to capitalise the vehicle or not.
Assuming the client wants to bring the vehicle into the accounts then you capitalise it now at its market value, as bringing it in at cost would not be reasonable as the vehicle was purchased last year.
You also want to bring in the HP liability at the value it was at the start of the year. Depending on how you account for HP interest (sum-of-digits or straight line) will determine what value that is.
The only way you can recognise the HP liability is to use that invoice as it will have the toal amount borrowed, the interest rates/elements, any deposits paid etc, which enable you to recognise the interest charge in the accounts properly.
The accounting entries for all of the above will differ depending on the status of your client. So I can continue to help if I know if they're a Company or not.
I assume the HP was taken out prior to the business start up. If this is the case i think the argument would be that the HP is in your name rather that the business. I do not think you would be able to bring the HP liability in the business balance sheet. However if you are going down the mileage route this will not matter.
when considering bringing the vehicle into the business you will need to consider the amount of personal use the car will have i.e is it a family car, does the wife etc use it. If there is an element of personal use then the allowable tax deduction in relation to both expenses and capital allowance will be reduced by this proportion.
Also you can only claim the fixed rate mileage payments if your turnover is less than certain limits. c.70k is the approx limit. see pdf below.
