A self employed driving instructor got a new lease car in 2010/11. Would some kind soul please put me out of my misery and let me know how this is dealt with for tax purposes. There is some private use and he is nowhere near the VAT threshold. It is not HP either.
Many many thanks.
-- Edited by spurs1952 on Friday 12th of August 2011 11:34:22 AM
Would expect given is a pure lease and car will go back to the lessor at the end of term that the monthly payments would go though the profit and loss account in full as a direct cost.
When coming to do the tax comp a % of the costs to cover the personal use would be disallowed.
Dear MarkS, Thanks a million. Sounds right to me (ie makes common sense) but will obviously check the situation whether car goes back when I look at his agreement. I'm very very grateful for your prompt helpful advice. Best Regards Neil
The instructor may have some breakdown between business and private mileage already, if not, he should begin to keep a daily record of that to establish the private use percentage (disallowable).
Yes, duly noted, I will adjust for the private mileage use thanks. And while on that subject, and perhaps for a wider interesting debate, just what % of self employed people do you think keep detailed business/private mileage logs , and how often does failure to do so create serious problems with HMRC ?
Obvious question I know, but just to advance the discussion, how were the private / business proportions arrived at in the practice ?
I ask this because I've had both a driving instructor and taxi driver investigations where the result and back-taxes were heavily dependent on the proportion.
That was exactly my early experience too, and rarely any problem with HMRC. I recall being astounded that the estimates were often wildly exaggerated in the taxpayer favour with no apparent basis.
I do come across those who have had a company car who, without guidance, keep pretty good mileage records, upon becomming self-employed.
But usually, the client ignores the advice (even winning an investigation by the skin of their teeth) and the Revenue do not enforce it. Why is it we advise them everytime to keep private/business mileage records? Is it habbit; because professional bodies say so; because we live in hope; because we naturally feel at home with accuracy, or some other reason
.... Why is it we advise them everytime to keep private/business mileage records? Is it habbit; because professional bodies say so; because we live in hope; because we naturally feel at home with accuracy, or some other reason
Regards,
Tim
Belt and braces Tim
It's not because HMRC enforce the rules, it's because they don't always.
I think they are lulling us into a false sense of security, and one day they will suddenly apply the letter of the law. If you tell the client what they should be doing, there's no come back, when they suddenly have to explain to HMRC how they arrived at the figures they did. Although the client will probably swear blind that you never told them to keep records
I was browsing other webpages when I stumbled here. Good thing I came across this site because I gained something from the conversations above. Moreover, to inform you guys, January is a fantastic month to purchase a car, and it also occurs to be the time for exceptional January leasing bargains. Automakers from Honda and Toyota to Nissan, Kia and BMW are seeking to move inventory with leasing opportunities consumers cannot refuse. So, discover which automobiles have some of the best leasing possibilities out there. Check this out: January leasing deals await the discerning car buyer. Just click the link for the details.
