I have a client who is a hairdresser she runs a salon but the salon is not a limited company. She uses her car to get to and from work and also uses it to go to clients homes and to hotels to do wedding hair.
I have told her that because the car is not used wholly and exclusively for the company she can claim the business mileage but not the full expense of her car. Is there anyway that she could claim some of her repair expense's as if she didn't have the car she would have find alternative travel and deduct that expense from her profits.
Hi Vicki,
if she is claiming the mileage allowance (45p per mile for first 10,000 miles) then she cannot claim any more car related expenses as the allowance is for fuel and the general wear and tear etc of the vehicle. If she is claiming actual expenses then you would need to calculate a personal usage element and disallow this from all the car expenses (including any capital allowances). But remember if she has started on one of the methods she cannot change to the other.
She has only been claiming the cost of the petrol when she has done a particular job, so giving me the receipt and writing which job it relates too. This quarter she has started including receipts for the repairs and up keep of the car.
If she were to claim a certain percentage of these costs, would I have to then include a capital allowance? She owned the car a good few years before she was self employed. If I did include the car, how would I find out it's value? Would I search similar cars and what they are selling for and start from there?
Is there a certain percentage that the car must be used for business purposes before this is allowable? Say, if the car was only used 20% for business usage would that enough to fall into the ''allowable expense'' bracket?
Hi Vicki,
the easiest (in theory!) way to do this would be to work out her total annual mileage and also work out her total business mileage. From this you can calculate how much allowable expenses can be claimed. You could then put through all the car expenses through the accounts and then make an adjustment to the profit for the private use element when working out the tax. Are you doing the tax return, if not leave it to the accountant. The same disallowed percentage would be applied to any capital allowances for the car. There is no restriction on the allowed/disallowed usage percentages. You would need to introduce the car at market value, which tends to be a best guess or looking at Ebay.
If this is her first year I would suggest going down the mileage allowance route as it's much simpler and may be more beneficial in any case (Though without knowing the numbers I couldn't comment definitively).
This is her fourth year in business. Up until the beginning of this year nothing had been filed and she was incurring huge penalties from hmrc. Her step father was supposed to be looking after the books but let her down sadly.
To file all of the late returns she gave me a bag of receipts of salon expense's and her takings and I filed from them alone. For this year she said she would like to start claiming for her car and the expenditure on petrol for when she's out about doing hair for weddings. Technically this will be her first year claiming for her car.
I'm with you Rob about the 45 pence for the first 10,000 miles, it sounds much more attractive. I normally, unless the client uses the car/van purely for business advise people to claim tax relief that way. I just wondered if doing it another way would maybe be more effective.
Thank you for your input, it's interesting to hear how other people deal with these issues.
