Mileage expense question

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Emrhino
Emrhino Registered Posts: 39 Regular contributor ⭐
in General accounting discussion
Hi all,

I have just taken on a new client (painter/decorator) and am looking at his accounts from last year.

He has a van which he uses for business purposes and his previous accountant has put the total amount paid for it through as AIA.

They have then used his mileage records to calculate mileage expense @ 40p per mile but disallowed 10% personal use (although they allowed 100% of the van costs for AIA).

I was under the impression that the 40p per mile included an element for 'depreciation' etc so this should replace ALL running costs - including Capital Allowances. Am I wrong?

Also, surely you would only use this for business mileage rather than calculate total miles the van has done and disallow some?

I don't normally mix and match - if client was claiming CA's I would record all running costs separately and then disallow reasonable proportion. I only use mileage method when they're using a 'personal' vehicle - I know they're all personal but you know what I mean!!!!

Am I missing a trick?!

Em

Comments

  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Sounds wrong, if I'm reading it right.

    If you put the vehicle through as a business asset you can't then use the 40p

    Its one or the other!
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    Yep, sounds a mess.

    Are you sure the mileage is for the van and not for a car that he also uses for business purposes?
  • Emrhino
    Emrhino Registered Posts: 39 Regular contributor ⭐
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    Thanks both, not just me then!

    Good point, Dean - I have a meeting with said client tomorrow but I'm pretty sure it's all van related.

    They haven't included any fuel/repairs/RFL costs etc so I think they've tried to capture it all in the mileage calc - bizarre.

    Would you raise it as a query with the previous accountant? Don't really want to look like I'm questioning their work...but I am!!
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Emrhino wrote: »
    Thanks both, not just me then!

    Good point, Dean - I have a meeting with said client tomorrow but I'm pretty sure it's all van related.

    They haven't included any fuel/repairs/RFL costs etc so I think they've tried to capture it all in the mileage calc - bizarre.

    Would you raise it as a query with the previous accountant? Don't really want to look like I'm questioning their work...but I am!!

    Just a but rubbish for you. Client will be thinking old accountant saved me loads or money and new ones costing a load! :D
  • Emrhino
    Emrhino Registered Posts: 39 Regular contributor ⭐
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    Lol. Client moved to me because he was worried his accounts were being prepared by an unqualified junior at a fairly big practice!!! Oops.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    I would be inclined to draw a line under it. What a previous accountant did is in the past. You will be opening up a can of worms.

    Yes, it's wrong. Do it right going forwards. I'd be inclined to use the actual cost method as opposed to mileage as it seems more fair, given that an AIA has been given.

    What a mess!
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
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    Emrhino wrote: »
    Lol. Client moved to me because he was worried his accounts were being prepared by an unqualified junior at a fairly big practice!!! Oops.

    Seems the worries were justified!

    Pretty worrying if a big practice leaves juniors unsupervised. I think you often get better service with a smaller firm.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    PGM wrote: »
    Seems the worries were justified!

    Pretty worrying if a big practice leaves juniors unsupervised. I think you often get better service with a smaller firm.

    We get this a lot. Client moves to us from big high street practice and we see really rookie errors - juniors clearly unsupervised.

    This is why it took me so long to take on staff, delegating work is really scary! I have an excellent team though and make sure they are supervised if they are doing something new. Supervising juniors really isn't rocket science, it's really bad that some larger firms do this, especially when people often go to a larger high street firm as they feel safer!!!
  • Emrhino
    Emrhino Registered Posts: 39 Regular contributor ⭐
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    Thanks for all your comments, peeps.

    Yeah - apparently they had also recorded a number of capital injections into the bank account as earnings, inflating the taxable profit for last year quite significantly.

    They also did this for another new client I have gained from the same practice - I know juniors have to learn (we've all been there) but it's a bit bad these weren't picked up.

    If they've done it for two clients you have to wonder how many others haven't realised yet...

    Thanks again!

    x
  • stefanboro
    stefanboro Registered Posts: 187 Dedicated contributor 🦉
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    Just to reference the point here is a link to the relevant (albeit one year out of date) HMRC publication:

    http://www.hmrc.gov.uk/helpsheets/hs222.pdf#page=3

    It's on page 3 (how exciting)

    The specific quote is:

    "..no other motoring expenses (other than interest on a loan used to purchase
    the vehicle) are claimed and no capital allowances are claimed on the
    vehicle (since AMAPs rates already contain an element to allow for
    depreciation).."

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