It was completely correct but it didn't actually answer the question asked or properly address the scenario which I read differently to as it was intended (sorry Michael).
Now replaced by answer below.
kind regards,
Shaun.
-- Edited by Shamus on Wednesday 16th of January 2013 09:18:39 AM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have a Buy-to-Let with my business partner. He lives 1 mile away and I live 10 miles away. When he drives to the property he claims £0.45 and when I visit the property I claim £4.50
Not exact, but you get the idea.
On the face of it, it looks like what you would expect, but everytime I visit the property he basically pays £2.25 towards my fuel and vice versa I pay £0.23, so when you look at it like this he is making a bigger contribution to my fuel than I am on his.
His thoughts are rather than us both charging to the company maybe we should charge to our personnel expenses and just add the relevant amounts to our individual tax returns at the end of the year.
My thoughts are the expense was incurred on behalf of the company and it should be charged to the company.
We have different opions on this and would like to hear other peoples thoughts, maybe you have a different idea?
I think in my effort to keep it short I may not have explained myself correctly. When I say he pays me £2.25 what I mean is I am taking £4.50 out of the company (10 miles * 45p), therefore reducing his profit by £2.25
Oops, I think less haste more speed from my perspective as well.
If the property is owned by the company then your understanding of the situation is correct and these should be charged as expenses against the company.
If the property were owned privately then it would not go near the company accounts.
As this seems to be the former option then charge as an expense to the company.
As for reducing his profit by 45p don't forget to factor tax into that.
The 45p is taken as an expense therefore tax free from profit that would have been taxed (at 20% / 26%). Following that assuming the profits are taken as a dividend then there is tax charge on the dividend (10%/32.5%/42.5% dependent upon income).
What I am basically saying is that although you actually physically receive 45p you are not robbing the other director of 45p income but rather simply reducing the other directors paper profit.
If the other director is so concerned then reduce your salary by the difference so that you still both take the same out of the business but after tax you still come out better off.... Although for 10 miles say half a dozen times or less per year then the time that has been invested in debating this with the other director will have already set you back more in the opportunity value of lost time better spent on more productive returns than either of you will have gained or lost.
Another consideration is that if the other director lives only 1 mile from the property then they will I assume make more trips to the property during a year than yourself as it is more convenient for them to pop around than you. Do you complain that they make twenty trips where you make only two?
In answer the original question though the mileage should be expensed through the company.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The property is privatly owned, I was advised not to use a limited company until much bigger. What's the difference, I assumed a partnership would be the same. Suppose this scenario, supplier delivers materials to site and charges £10 delivery. Surely materials and delivery charged to partnership. I drive to B&Q and buy same materials and claim £10 fuel allowance. Surely I still charge both to partnership?
Right, let me get this right. The actual legal form is a partnership that owns a property so you will be filing an SA801 yes?
You would be using your own vehicle for which you can charge whatever you like but any more than 45p per mile and its a taxable benefit.
Remember that when you pay to have goods delivered you are paying also for the opportunity cost of the truck, the drivers time and the stores profit margin on the delivery.
When you claim 45p per mile you are claiming compensation for the business using a vehicle for which you have paid all expenses including petrol, insurance, tax, servicing, etc. The fact that mileage is used as a basis is simply the prime cost denominator in the equation.
A partnership is very different to an incorporated entity, for example, as discussed in another thread this week both partners are responsible for each others losses.
what did you mean by you could claim both? All that is being claimed is the mileage allowance against the business. You have only made one trip to B&Q. Not sure what you mean by both?
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
With a partnership you affectively giving the partnership some funds (the costs of using your individual vehicles).
To offset the useage against profits, I would post the allowance as debit to Motor/ Travel (or what ever suitable account you have ) and credit the individual partners Capital Introduced account (or start a Partners Current Account which might be better for tracking the allowances).
When the profit is distributed at year end each partner will get back what they have put in for travel by adjusting the capital/ current account, and an expense is created against the profit.
