Hi, got a client asking how much of the purchase price of his car can be used against business? Says business use is main reason for having it, though it only for delivery of his goods. Also calculations percentage of tax he will pay? Any advice appreciated!
There are basically two ways to calculate the private use of a motor vehicle, and depends on circumstances.
The easiest (and probably the best from an HMRC point of view) is to keep a record of actual business mileage, and claim 40p/ 45p (2010/ 2011 rates ) per mile for the first 10K miles (25p mile after 10K), and make no other motoring expense claims.
The other, is to calculate the business use/ private use ratio and make adjustments at the end of the year. This still requires a record of mileage but I have seen several sets of prepared accounts that have estimated the split but, this way worries me if HMRC ever investigate, they will want to know how it is derived.
This is a simple scenario based on a not VAT registered, sole trader. It gets a bit more complicated if it is VAT registered and/ or limited company
