Some questions....

Name: Sean

Hi,

Can anyone help me/point me in the right direction with these questions?

1. Mileage - is a sole trader allowed to claim mileage or do they have to claim cost of petrol? If they get the choice, bearing in mind this is a non-VAT reg business, which one is it best to use?

2. How do you treat payments to a charity?

Thank you

bumblebee

1. considering the sole trader uses their own vehicle for the business claiming mileage would normally be a the right option.

2. charity is accounted for on the tax return.

Monsoon

bumblebee wrote: »

1. considering the sole trader uses their own vehicle for the business claiming mileage would normally be a the right option.

Agreed. A sole trader turning over less than the VAT threshold has the option of claiming either 40p a mile (first 10k miles, 25p thereafter) or actual costs of the car, less any private use proportion. Once they elect to use a method, they have to stick with it til they change the car.

I advise to run both methods in the first year to see which will work out better (bearing in mind future year projections too e.g. reduced capital allowances as the years go on). More often than not, mileage rate is more tax efficient (and simpler). They Must keep a mileage log.

A sole trader who turns over more than the VAT threshold has to use the apportioned actual costs method. (Technically everyone has to use this, but the 40p a mile for smaller traders is allowed as a concession I believe).

If a sole trader goes over the turnover threshold and was claiming the mileage rate, they must carry on using it until they change their car. Once they change it, they have to use the actual cost method.

Name: Sean

Thank you!

They also bought a new car (Kia Picanto) for £4845 which they paid for in full. Took advantage of the scrappage scheme.

They use it approx 50/50 for business and personal use. How is it best to deal with this?

bumblebee

Well, all expenses and allowances will therefore apportioned 50:50 (private:business).

T.C.

And don't forget to apportion the capital allowances or AIA 50:50 too.

bumblebee

Good point!

Anne Boleyn

Aia

Hi

As far as I'm aware you can't claim AIA for a car unless dual control ie driving instructor.

Monsoon

Anne Boleyn wrote: »

Hi

As far as I'm aware you can't claim AIA for a car unless dual control ie driving instructor.

I don't know about the dual control, but agree that in general you can't claim AIA on car (just as you couldn't claim FYA on car).

You can claim AIA on vans.

To be honest though, on a car that cheap and fuel efficient with only 50% business use, I'm sure it would be more tax efficient to use the mileage rate not apportionment method.