Yet another 'use of a private car for company business' question...
The Ltd company has 2 directors who drive to the clients' sites every day using their own personal cars. I understand that the company can pay each of them 45p per mile for the first 10,000 business miles for the year and 25p per miles for the rest of the business miles without any tax implication (so it's a simple bank transfer from the company bank account to the directors' bank accounts).
I'm not 100% clear on the bookkeeping entries for this. I believe the company would record this as motoring expenses, e.g.
DB - Motoring Expenses
CR - Bank Account (for the payment to the director's bank account)
and there would not be any entry for petrol purchased for the cars (under the assumption that the directors pay for petrol using their own money). If the directors happened to use the company debit card to pay for the petrol then I would post this payment to the Director's Loan account as it is petrol for their own car and the business portion of it is already accounted for using the approved mileage as above?
Also I believe there would not be any VAT implication as the VAT on the petrol would not be reclaimable by the Ltd company.
Can anyone confirm that my understanding is correct as the majority of my clients are self employed and I'm not big on Ltd companies.
Thank you.
Fabs
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I have set up my Director as a supplier and enter his milage expenses as an invoice and have set up a nominal code for mileage expenses so code the invoice to this. That way you can keep a separate track of mileage as opposed to general motor expenses. When I pay him the mileage I just do a supplier payment as normal. You would not make any entries for petrol etc as this is covered in the mileage claim.
I don't think you can reclaim VAT on the mileage for a Ltd Company, but am not 100% sure on this, so perhaps someone else could clarify this?
