Changing vehicles and how to claim motor expenses

Rizwan

Hi all,

Being a driving instructor myself and submit my own Accounts to HMRC.
I have been using cash basis accounting previously and now want to change to mileage.

I have an automatic and a manual car. Always buy vehicles secondhand and use until it starts to require more frequent maintenance. The automatic is only used for business and is the main source of income, the manual is now probably only used for around 10% of the time for business.

I have purchased a newer automatic car in January 2018 and having looked at the expenses it appears I would be better off claiming mileage only (45p/25p for mileage) I'm also aware that you can only claim via a new method when vehicles have been changed. (I have kept mileage records)

My Accounting period is from 1st April to 31st March.

My question is, Can I change how I claim during this period or do I have have to wait for the next Accounting year (i.e. for period ending 31st March 2019) to change methods. If so, how do I change the records? I understand that when entering the figures on the online tax return I have to select the method I'm using and continue with that.

I have apportioned the depreciation costs and can easily change the remainder of 3 months
Any help would be appreciated.

Kind regards
Rizwan

douglasstroud

Hi
Where you say you are using the cash basis do you mean that you have been using the actual expenses for your old car and now you have changed cars you wish to use the flat rate for mileage if this is correct then you can claim this from the time the car comes into use (Jan 18) you do not have to wait until the start of a new tax year but once it has been claimed you must stick to it.

Not sure I understand what you mean about the depreciation perhaps you might elaborate some more with a bit more information.
Which method are using to prepare your accounts the cash basis or the accruals basis?

Rizwan

douglasstroud said:

Hi
Where you say you are using the cash basis do you mean that you have been using the actual expenses for your old car and now you have changed cars you wish to use the flat rate for mileage if this is correct then you can claim this from the time the car comes into use (Jan 18) you do not have to wait until the start of a new tax year but once it has been claimed you must stick to it.

Not sure I understand what you mean about the depreciation perhaps you might elaborate some more with a bit more information.
Which method are using to prepare your accounts the cash basis or the accruals basis?

Yes, I have been using the actual expenses for the old car.
I have been using cash basis to prepare my accounts.
Thank you for the information.

Also, which expenses can I still claim for apart from Insurance, repairs, road tax, etc?

douglasstroud

Hi
I am basing the following comments on you having bought the cars outright and not part of any terms and agreements.

You still did not clarify what you meant about depreciation, hopefully you have not been allowing for this on your previous returns as you do not get tax relief for depreciation you should have been claiming CA instead.

As for the flat rate mileage the 45p/25p per mile covers all the costs in buying and the upkeep of the vehicle such as fuel, repairs, servicing, insurance and road tax.
The only expenses you may claim for will be for tolls and parking as long as business related.

Rizwan

Hi

Yes, I have been purchasing the vehicles outright with no loans or credit agreements.

Sorry, my mistake about preparing accounts by the cash basis. It is indeed by Accruals basis. Checking my accounts done by Accountants from 5 years ago it was indeed Accruals. I have not been taking a capital allowance and have been allowing for depreciation. I have just followed the same principle as the accounts prepared by previous accountants for around 6 years.

The expenses I was thinking about are things like postage, stationery, CPD and subscriptions.

RyanMIP

Oh heck!

douglasstroud

Hi
Can`t see a problem with claiming those expenses as long they are business related.

Yes you will find that depreciation is allowed for in your end of year accounts however it should then be added back and not appear on the tax return as an expense, instead you should be claiming Capital Allowances and WDA at either 18% or 8% depending on the car.

Rizwan

Hi.
Thanks for the information, very useful.

RyanMIP

> @Rizwan said:
> Hi.
> Thanks for the information, very useful.
> Sorry for being completely blank but what is WDA?

Writing down allowance(s).

Depreciation is not an allowable expense for tax purposes. Sounds like quite a few of your tax returns are wrong - rather you than me!