Ltd Co, private car

Hollysan

Hello everyone,

I have a client who incorporated last year. As a sole trader, the director put all her car expenses through her business and we then disallowed a private proportion. As a director, my client has continued to do this rather than claim mileage - it is her year-end at the end of March and I have just checked her book-keeper's postings in Sage. Maintenance and repairs have been paid for out of the company bank account. Given that the car is privately-owned by the director can we include the car expenses (insurance, maintenance, tax etc) as allowable expenses of the company, as you would with a company car? Presumably this would give rise to a benefit in kind for the director and Class 1A NICs for the company, but my question is really whether it is ok to treat the expenses in this way. She earns more than £8.5k so a P11d would be required.

Any advice gratefully received!

Hollysan

paulstafford

My first thought would be to re-post the car expenses to her Director loan account and then claim a mileage rate for business miles incurred, via a credit to the director loan, as a company expense.

Despite the car remaining in her name , I would suggest to your client HMRC would look to tax it as a company car if you allowed the insurance etc through as a business expense.

Hollysan

Thanks for your reply, Paul. Yes, that would be one way to do it. The client is reluctant to log mileage - she says she will forget to do it. Also I'm not sure how easy it would be to do this in retrospect, going back to last April. Are you aware of any other method to get round this?

Thanks,

Hollysan

paulstafford

how did you used to calculate her business mileage when she was a sole trader if she kept forgetting to log business mileage? Nothing has changed in this respect.

If she can't be bothered to calculate her mileage then show her the potential tax and NI due if you treat it as a company car. That may make her change her mind.

I can't think of any other ways around it.