cars

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Hi, Can anyone give me advice regarding sole traders.
I have a friend who has his own building business, and has recently purchased a works van through the business, but now he has decided to purchase a diesel car and has asked me if he can purchase this through his business,he will be using it sometimes to visit clients when quoting, and for taking clients to choose materials etc if necessery.
If anyone has any advice about this it would be appreicated. :D

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    Assuming he is also keeping the van then he will struggle to convince HMRC that the car is also used significantly for business purposes.

    The strict position is that he can claim whatever proportion of the mileage he does in the car on business purposes. If he keeps a detailed mileage log and uses the car 50% for business then I would have no problem supporting his claim.

    However, not wishing to be biased towards builders(!) if this is a vehicle bought for his wife, or only used at the weekends to go shopping and take the kids to football then it is not a business vehicle!

    I would be happy claiming around 10-20% of the costs.

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    I've got a client in the same situation. He keeps a notepad in the car and makes a note of business miles done then claims 40p a mile for these journeys. (this method can't be used if your friend's turnover is over £64k)

    Luckily my client's car runs on petrol though so I can tell from the receipts whether he's been filling up his car or van. Your friend should make sure he keeps his car/van diesel receipts seperate or else it's going to be very hard for anyone to calculate what can be claimed, whatever method they use.

    Jodie
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    Sound like this subject has some grey areas and needs to be trodden carefully.
    Thank you both for your advice. :)
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    I didn’t realise that there was a threshold set when applying the “FPCS” method in terms of turnover. I know that the first 10,000 can be claimed at a maximum of 40p, and everything after can only be claimed at 25p tho….. :D
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    Hi LeeLee,
    This is a bit of a grey area, but I'll tell you want happens in the practice I work in.
    1)We would not advise a client to buy a vehicle through his small business because of benefit in kind taxation problems.
    2)We would apply mileage allowance for the van use, adding back 20% for private use.
    3)We have never applied a £64K turnover limit on any claim.
    4)We use the 40p/25p rule.
    5)For the private car, if it is used for business, we would ask the client to keep a log book and claim back for the business miles only.
    These are the rules as explained to me by my head of practice but I'm sure that if I am incorrect, one of my esteemed collegues with more experience will correct me.
    regards
    Peter
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:cars

    He can claim 40 p per mile for the first 10,000 miles and 25p per mile thereafter only if he is using his own car for business. I have never heared about any limits in relation to turnover.
    If the car is bought thruough the business then the employee/director can suffer Benefit in Kind on the car and petrol. In this situation it's better to pay for his private petrol himself and get reimursed only for the business miles.. the rate depends on engine capacity... for diesel it is 9p per mile... but definately not 40p.
    If it happens that he has a business credit card which he is using to pay for the petrol. Than he should keep milage records for his business miles and the excess miles needs to be reimursed to the company at the same rate.. eg.diesel 9p.

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