This is a different kettle of mackeral and is accountancy rather than bookkeeping related so don't rely so much on my advice.........
I can only give you an example of one company I look after and what I do for the company car.....
Mileage for business miles (not commuting or personal) is claimed using the advisory rates published by HMRC and reviewed quartery so can change:-
Company cars - advisory fuel rates from 1 December 2011 These rates apply to all journeys on or after 1 December 2011 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.
Engine size Petrol LPG
1400cc or less 15p 10p
1401cc to 2000cc 18p 12p
Over 2000cc 26p 18p
Engine size Diesel
1600cc or less 12p
1601cc to 2000cc 15p
Over 2000cc 18p
Hasn't copied very well, so see here: http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
This means that there is no 'benefit in kind' tax to be paid by the Director reportable on his annual P11d (for petrol, he still has to report the car). He is quite free for the company to pay all his petrol costs but that leads into the BIK tax mentioned and I won't go into that further here.
The company pays for the insurance in my example and only covers employee (Director). Again if it is the Directors own company then he can do what he likes, but ultimately Class 1A National Insurance may be payable by the company and BIK tax by the Director if deemed to be a way of taking money out of the business other than dividend or reported salary.
I'm going to stop there and let someone else help clarify - for what it's worth I hope that helps!
I think it would be worth totalling up the annual spend on Motor Expenses; to include Fuel, Insurance, MOT, Repairs etc.
Once you have the total amount spent in the year - you can then calculate the total (Business Only) business miles that the director completed in the year and then multiply by 45p for the first 10,000 miles and then 25p for any additional miles.
Now, you will need to compare the amount claimed in the full motor expenses claim against the amount they could of claimed via 45p/25p expense reclaims route - you will then be able to evaluate if completing the BIK (P11d) form is the most tax efficient method to reclaim the clients motor expense costs.
Hi Ben - good advice if the Director is using his own car, and the business turns over less that the VAT threshold, but Becky is talking about a company car so this option doesn't apply, unless I am misunderstanding you.
My understanding of reclaiming mileage is as follows:
if you own the car ...its your car and you use it for work ..then you can reclaim the mileage costs at a fixed rate per mile which includes petrol and the wear and tear of the vehicle etc
If you had a company car (both directors have one) then the company owns the car and therefore you can not submit a mileage claim because you should not be reimbursed for the wear and tear...because its not your vehicle ...its the companies and therefore you submit petrol reciepts which the company can recaim the vat on ??
ALso if its a company car then surely all expenses etc should be paid for by the company ie repairs insurance etc ? not paid for by the director and reclaimed or is this irrelevant?? also if the director owns the company then he can have who he likes on the insurance??
I assumed (possibly wrongly), that all of the motor expenditure had been made, but this could have been in error and could subsequently be posted to the Directors Loan Account and then the 45/25p mileage claims calculated to offset the expenditure.
I had not considered if they had claimed any VAT as yet, so you may be on to something there.
It's interesting how we can all read something different into the questions posted and shows the need for a forum like this -so that we can confirm our view point on certain topics and get the right answer in the end.
Just be wary of BIK, for example around the Director using fuel for private use paid for by the company - the tax can be horrendous depending on the car (more than the cost of the fuel)
- it's worth a read up on as you seem switched on......
so, Becky the Blonde Bookkeeper.... have a and enjoy the read.
the company accountants have told the directors to submit mileage sheets ??? I have been arguing that they should submit petrol reciepts for ages but they having non of it so will defo read up on it and advise again and then leave it to the directors and there accountants else I shall end up going nuts ..lol
the other thing is all expenses have been T0 .. ye I know ...... the reason for this is when I first started here (2 years ago) I had come straight from the 3rd sector and VAT is diferent so I thought it through and decided that it should be T0 as the supplier (the employee) was not VAT registered and therefore not submitting a vat reciept so VAT could not be re-claimed ?
if you own the car ...its your car and you use it for work ..then you can reclaim the mileage costs at a fixed rate per mile which includes petrol and the wear and tear of the vehicle etc
If you had a company car (both directors have one) then the company owns the car and therefore you can not submit a mileage claim because you should not be reimbursed for the wear and tear...because its not your vehicle ...its the companies and therefore you submit petrol reciepts which the company can recaim the vat on ??
ALso if its a company car then surely all expenses etc should be paid for by the company ie repairs insurance etc ? not paid for by the director and reclaimed or is this irrelevant?? also if the director owns the company then he can have who he likes on the insurance??
thanks guys :)
If the car is owned by the company, then it picks up the tab for maintenance. However, for fuel, there are two options:
- The company pays for all fuel and the employee is treated as having received a BIK (which is additional to the BIK for having a company car)
- The employee reclaims business mileage on a ppm basis, as outlined by Ken. The ppm figures are lower than the 45p if you use your own car, because they only cover the fuel element (i.e. not the running costs or capital depreciation)
so will defo read up on it and advise again and then leave it to the directors and there accountants else I shall end up going nuts ..lol
