Car Lease & Mileage allowance?

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awwallace22
awwallace22 Registered Posts: 35 Regular contributor ⭐
in General accounting discussion
I have a senario and hope someone could clarify.

A self employed sole trader (not vat registered) uses a leased car for 80% business use 20% PU. He claims the 80% lease but no capital allowance. But can he claim his 8000 business miles using the mileage rate or will he need to claim his 80% fuel receipts, car insurance, RFL as an expense. I thought that the mileage allowance incorporated an element of capital allowance so Im not sure if he can claim the lease and mileage allowance together? :confused1:

Any feedback much appreciated.

Thanks

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  • sloshed
    sloshed Registered Posts: 100 Dedicated contributor 🦉
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    Hi

    I might well be able to help with the tax treatment as I am currently doing the ATT tax papers but it will depend on the lease. Is it a finance lease or a operating lease?
  • awwallace22
    awwallace22 Registered Posts: 35 Regular contributor ⭐
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    Operating, thanks
  • sloshed
    sloshed Registered Posts: 100 Dedicated contributor 🦉
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    Hi

    I have had a look at operating leases and firstly it is correct not to claim capital allowances as the asset is borrowed and the legal ownership has not changed hands.

    The mileage allowance is not strictly allowed as the tax law refers to employees and not individuals so it might be prudent to claim the 80% of expenses.

    If you decide to use the mileage rates I would suggest you use these rates which relate to the fuel element only

    http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

    Hope this helps :001_smile:
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    By concession he can claim the mileage allowance as a sole-trader (providing his turnover remains below the VAT threshold). The mileage allowance includes all associated costs (capital and revenue) aside from finance interest. He cannot came a proportion of the rentals in addition to mileage allowance.

    As an alternative, he can claim the appropriate percentage of all costs (rental and running) but no capital allowances, assuming it is indeed an operating lease.

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