My husband is a director of a Vat registered limited company. He does not yet take a wage and has no PAYE in place. He has someone who helps him but is not paid. However, the helper uses his van to get in to help him and take away rubbish etc. My husband gave him fuel expenses, but my sister who has been assisting with the bookkeeping doesn't think that's a legitimate expense. If my husband doesn't get help he is less likely to do more sales and take on work. Can anyone advise?
The person helps out regularly but is not paid at all as the company is very young. When the business is more established PAYE will be introduced and he will become an employee. We haven't paid him for mileage, he just filled up his Van with petrol and we paid him his costs.
I would recommend you pay him mileage instead of fuel costs. Filling the tank up of a vehicle that is not owned by the company but by the helper in question, possibly opens the door to to all sorts of scenarios that if investigated, could cause a few problems for both the company and the helper.
The costs claimed by the company should only be for business use, therefore if the helper uses say 50% of the fuel for help provided and then the remaining 50% is for private use, then its possible the private element could be classed as a form of Pay.
Judging from your initial query, I cant imagine that the amounts involved are a great deal and probably if there is a private element to the fuel costs reimbursed it will fall under the minimum amounts for Tax and NI anyway.
But its always best practice to ensure that this is treated correctly to avoid any repercussions to both parties.
If the van is owed by the company, then this is a different matter and reimbursement of the helpers out of pocket expenses is allowable upon production of the receipt.
I would also double check the rules surrounding VAT on mileage as the company may be able to reclaim the VAT on the fuel element of the mileage costs in relation to the engine size.
I would go along with Pauls recommendations and get the helper to complete a mileage log for future expenses.
If it is a small amount being paid, I may be inclined to enter it as a casual labour payment expense rather than a motoring expense but this would mean the helper having to declare it
