Motor expenses

System
System Posts: 100,537 πŸ€– Admin πŸ€–
edited June 9 in General accounting discussion
If using the AMAP rates as a sole trader, are there any other motor expenses (other than interest on a loan for vehicle purchase), that can be claimed? I thought not. My client apparently has spoken to somebody in HMRC who says 'car parking' can also be claimed separately. Is this correct?

Thanks for any advice.
Simon

Comments

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    On the assumption that there is an element of private use with the motor vehicle car parking fees/fines and such like cannot be deducted.

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    I was under the impression that parking fines were not an expense as far as a self-employed person was concerned, but that parking fees would be because a self-employed person may need to use a car park in the course of his work.
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    TC's post made sense and sounded feasible. I therefore re-visited my answer in view of HMRC's ever-changing rules against guidance issued and I found this question that had been asked:

    Q: Can I deduct the cost of my motor vehicle when I also use it for private purposes?

    A: The proportion of your motor expenses relating to business use is allowable. The cost of travel between your home and your work is not business travel and is therefore not allowable. If your total motor expenses are £1,500 but only 1/3rd of your mileage is business you can only claim 1/3rd of the £1,500. Capital allowances are apportioned in the same way. You cannot deduct the cost of parking or speeding fines. Many small businesses find a fixed rate allowance easier.

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Steve,

    Thanks for your help again. Can you tell me where this question was posted, please? I think I am with TC on this.

    Unless I am mistaken, car parking fees are allowable as a legitimate business expense for the self employed, but parking fines are certainly not.

    If this is so, are car parking fees allowable as an extra expense if the sole trader uses the AMAP rates?

    Thanks again
    Simon

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    The link is:

    http://www.morganhemp.co.uk/faq.html

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    With great respect, this refers to parking 'fines', not parking 'fees'.

    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Simon,

    I'm sorry - I thought you were on about parking fines - I obviously read your post too fast and had it in my head you were referring to parking FINES not COSTS!!! I must slow my reading down!!

    Car parking charges are absolutely fine as long as they are incurred during the course of normal duties.

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Steve,

    Thanks for your reply - I understand the error, because Morgan, Hemp & Co.'s phrase,"you cannot deduct the cost of parking or speeding fines" would be better put as "you cannot deduct the cost of parking fines or speeding fines".

    Otherwise it can be misconstrued.

    Knowing your valuable input to this forum, can you advise me whether car parking may be added separately to AMAP rates. I think they can't.

    Best wishes.
    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Hi Simon,

    The error was on my part - I seemed to go into autopilot having parking fines in my head as opposed to parking fees!

    I have read your next question a bit slower!! :lol:

    I have never heard of adding the car park fees to the authorised rates and I don't think you can as they are a separate cost. We generally include car parking charges within travel & motoring costs.

    One thing you may want to advise your client to do is to keep a record of the purpose of the car parking charge. During the course of a PAYE compliance review one of our clients were subjected to - the Inspector referred to doing this because they do have the right to add back a certain proportion of travel/motor expenses if it cannot be substantiated that the expenditure was for business use. Indeed, these days, Inspectors are being paid bonus-related incentives to collect unpaid taxes and therefore will make all attempts to disallow as much as they can using their powers.

    Luckily for my client the Inspector did not add any back because it was negligible but I took his comments as a warning that this could be a tactic used by HMRC to recover more tax from the taxpayer.

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Thanks for your help, Steve.
    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    I've read this thread with interest. it highlights the ambiguity that many of us seem to come across when attempting to apply the correct treatment to various everday senarios.
    I think what you have both agreed on is that you can claim mileage at the approved rates, plus any business related parking charges (but not fines).
    I was interested to read the rest of Morgan Hemps website and have discovered the following:-
    The FAQ page seems to imply that you can deduct modest lunch expenses on business trips, whereas the TAX TIPS page states clearly that lunches are non-deductible. :?

    Any comments?
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Hi Sheelagh

    Yes I've read further on this website, and it does seem confusing. My understanding is that, when staying away on a business trip, reasonable subsistence expenses, including lunches, can be claimed.

    With regard to the car parking, I am sticking with HMRC Help sheet IR222 which states that, if using AMAP rates, no other motoring expenses can be claimed, apart from loan interest in respect of vehicle purchase.

    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    The problem is that most practitioners simply cannot comply 100% to Revenue guidelines as the legislation is so ambiguous to start off with it is simply too vast to interpret individual circumstances to case law. The problem we also face is that HMRC also struggle with the guidance.

    I myself have had to write to HMRC to ask for their guidance as to how I should treat company car usage. I have a client that operates within the property management sector - they employ housing officers who take company cars home. 90% of the time they have to travel from home to a property owned by my client. Is this private or is this business? The answer is nobody knows. HMRC cannot give me a definitive answer! I have been told to write in to an Inspector who will look into my case individually.

    The truth is that these housing officers want to know if they will be assessed or not on the car they have been provided with. Indeed, they will certainly be assessed on last year if there is a taxable benefit because they have had the car for a full tax year (if HMRC find not in favour of my client).

    You would think in today's age they would introduce more simplified legislation and guidance (especially guidance) - but true to form HMRC will always be a complete and utter waste of time who will always shirk their responsibilities onto the profession.

    Kind regards
    Steve

    p.s. any interpretations as to my current dilemma concerning the company car situation would be most gratefully received.
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    My thoughts are that the AMAP rates cover car running expenses - which parking payments are not.

    Annette

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses
    peugeot wrote:

    I myself have had to write to HMRC to ask for their guidance as to how I should treat company car usage. I have a client that operates within the property management sector - they employ housing officers who take company cars home. 90% of the time they have to travel from home to a property owned by my client. Is this private or is this business? The answer is nobody knows. HMRC cannot give me a definitive answer! I have been told to write in to an Inspector who will look into my case individually.

    Would the office where they are based not be there work address?

    I know that I used to work for a well known weight loss organisation who had some sort of dispensation which meant we could claim our mileage to the meetings at 22p a mile. I still don't know how that worked but the Revenue agreed it. We basically got our mileage wherever we went- we were counted as self employed as well which goes against all the employed/self employed rules but it is still the same way now.
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Yes it would, however, I have 2 problems here. They are not wholly office based.

    Firstly, this client is the one I told you about when I met you - the one who is wealthy and who had a dodgy previous accountant.

    Secondly, the staff have never been subject to the P11D rules before and there was absolute chaos when they found out they may be taxed on the cars they use for their routine day to day duties. There are clauses in their contracts which quite clearly states that the car they are provided for are NOT to be used for private use.

    When explaining this to both HMRC (who as per usual were about as much use as a paper scaffold) and another institute (who said they can't comment because it is too specific a HMRC query) I was at a loss.

    I don't want our client to suffer a class 1A liability if he doesn't have to, nor do I want the staff to pay for something they have to do.

    I am thinking of writing to an area director for clarification and seeing what s/he thinks!

    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Steve - I had the housing officer issue a few years back and the advice at the time from IR as it was then is to factor in the usual distance from home to work.

    If it was less mileage than the usual trip to the office then it is home to work - if it is more then it is the difference of the actual mileage less the usual home to work !

    I am sure this is out of date now - but it may be of use.

    I had a similar issue with those claiming mileage allowance - the amusing result was that housing officers were driving 35 miles to get to the office and then driving straight back to the town where they live to claim the 40p per mile !

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Hopefully I will receive a response this week - I will keep you posted.

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Re: the original post..

    Parking charges CAN and should be claimed in addition to the AMAP rates which only cover running costs and capital allowances. As has been mentioned an appropriate proportion of financing costs can also be claimed.

    Parking fines normally fail the W&E test UNLESS it is an employee (not a manager or owner) and it is incurred in the performance of his duties and reimbursed by the employer. Details here.

    No disrespect to Morgan Hemp but I am not sure when their website became a source of legislation! Information on my own website is simplified for clients and probably errs on the side of caution for their own benefit.

    Re: Steve's company car problem.

    Tricky one. If the employees keep the cars at their home and drive it to and from work every day (wherever that may be) I cannot see how you can argue against a P11D benefit. If the cars are kept at home then they are 'available' for private use, even if it goes against contractual terms.

    Remember, employment contracts only hold weight if they are representative of the reality of the situation. If any of those employees had a personal emergency and only the company car available then the cars would very much be available for private use.

    If the employees had no office base but instead were contractually based at home from where they had to travel to various workplaces then you may have a case. Otherwise I think you are stuck.

    I would try and apply for some form of dispensation with HMRC but I think the chances are slim. It will be interesting to hear HMRCs response.

    Incidentally, my fiancée is a housing officer and although she is usually in a different place every day, contractually she 'belongs' to a particular office. They have pool cars that don't go home (well, not too often anyway!!)

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Thanks, Dean.

    What about bridge tolls - are they a 'running cost', or can they be treated separately from the AMAP rates, as you say parking fees can? Are there any others or, perhaps, is this only applicable to parking fees?

    Thanks.
    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Bridge tolls are also allowable in addition.

    Basically, anything that is not a running cost is allowable.

    I can't think of anything other than parking or tolls off hand. Car wash fees I'm sure would be considered a running cost.

    Just to add: No private use adjustment is required to parking or tolls for sole-traders either, providing they are incurred on a business trip. I know they sometimes all get lumped into motor expenses and an adjustment is inadvertently made.
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Ok I will give you an update on my situation. Dean S this may be of interest to you in connection with your fiancee.

    I have done a lot of digging around various case law and other bits and bats from tax books. Guidance issued by HMRC states that a car provided to an employee will automatically be treated as having been made available for private use. There is an escape from this automatic treatment if the terms on which the car is made available prohibit private use and it is not in fact used privately.

    There is case law on this (Gilbert -v- Hemsley). The taxpayer was an employee of a plant hire company. He was required to be on call at any time and was provided with a company car. He used this to travel between his home and the company's nearby business premises and for genuine business trips. He successfully argued before SpC that he was prohibited from using the car privately and he never used the car for private motoring.

    Apparently the key principles that emerge are:

    1. There must be an EXPRESS ban on private use, that is the ban must be explicitly stated, so that an implied ban is insufficient to meet the test.
    2. There must be an ENFORCEABLE ban on private use, that is it must be meaningful and underpinned by the possibility of disciplinary action if the prohibition is disobeyed
    3. Providing these factors are present, and depending on the context in which it is delivered, a verbal prohibition may count as an effective and meaningful ban on private use.

    In the case of Gilbert -v- Hemsley it was accepted that the car was not used for general social, domestic or pleasure motoring. It was used for travel between home adn work, but in the particular circumstances of the case it was accepted that home was a place of work and that travel between the two places of work counted as business travel.

    The only area I feel may be a problem is in relation to my clients employees office base and where they travel. For example, if an employee lives 20 miles away from the office then travel to the normal base could be caught by the benefit - if he lives 10 minutes away (say less than 20 miles) then I think there is a case to argue here for the tax benefit to be waived - especially if we were to change the employees normal place of work to their home (which would not be unfeasible) as they are Housing Officers who spend the majority of their time commuting between my client's properties (he has in excess of 2,500 properties).

    I have sent my case to a tax specialist (as HMRC simply say "a benefit will arise" without enquiring into the underlying facts. I will have confirmation of my case hopefully next week so will keep you informed.

    Just goes to show, though, nothing is black and white (or straightforward!)

    Tax doesn't have to be taxing! Whoever made that up wants shooting!

    Kind regards
    STeve

  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Just as an add on to the above. I have recently been in cahoots with HMRC about a client who has an associated company. HMRC at first said "the company is associated for corp tax purposes". This had a substantial effect on my client because it meant paying CT at 30% rather than 19%.

    It was argued that the associated company did not carry on a trade - they simply had a debtor on the balance sheet (representing loan notes) and received dividends. HMRC wrote to us saying it may carry on a trade because it has a debtor on the balance sheet, charges interest and receives dividends.

    I argued under Code of Practice 10 which basically says that an entity not undertaking "tradeable" business does not have to be associated for corp tax purposes. HMRC have now agreed and the client has saved £8.5k in corp tax.

    It is worrying the amount of work we have to do to prove HMRC's legislation to an Inspector!

    Kind regards
    Steve
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Dean,

    Many thanks. Although I accept your answer as totally credible, where can I see 'in writing', as it were, HMRC's assertion that parking and tolls can be treated separately? I can't seem to source this information. IR222 is, in this case, unhelpful.

    Thank you.
    Simon
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    IR222 is very unhelpful I agree!

    Take a look here.

    Congestion charges are one to add to tolls and car parking!!


    Re: Steve

    Thanks for the info - very useful. Let us know how things go with the specialist.
  • System
    System Posts: 100,537 πŸ€– Admin πŸ€–
    Re:Motor expenses

    Thanks very much, Dean!

    Simon

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