Self Employed Motoring Expenses - Method
Discussion
Technical Question -
Two methods of calculating motoring expenses, the actual basis (after applying a deduction for personal miles) or the 45/25ppm basis.
It used to be the case that if you purchase a vehicle at a time your turnover is greater than the VAT threshold, you are obliged to use the actual basis and could not use the 45ppm basis. If you were using the 45ppm basis at a time your turnover exceeded the VAT threshold, you could continue in that way until such time as you changed your vehicle, at which time you then had to start using the actual basis.
This is contained in (BIM)47701. I have seen mention that this no longer applies (the implication being that you can exceed the VAT threshold and elect to use the 45ppm basis). Does anybody have any idea if that is correct?
Two methods of calculating motoring expenses, the actual basis (after applying a deduction for personal miles) or the 45/25ppm basis.
It used to be the case that if you purchase a vehicle at a time your turnover is greater than the VAT threshold, you are obliged to use the actual basis and could not use the 45ppm basis. If you were using the 45ppm basis at a time your turnover exceeded the VAT threshold, you could continue in that way until such time as you changed your vehicle, at which time you then had to start using the actual basis.
This is contained in (BIM)47701. I have seen mention that this no longer applies (the implication being that you can exceed the VAT threshold and elect to use the 45ppm basis). Does anybody have any idea if that is correct?
From a 2013 article in Taxation Magazine -
Until 2012/13, the use of mileage rates was available only to the self-employed if the turnover of the business was below the VAT threshold when the vehicle concerned is first used for the purposes of the business.
From 2013/14 (with the legislation as drafted), a mileage deduction is available, regardless of the turnover level, if:
the business would otherwise be entitled to some deduction in respect of the vehicle; and
neither capital allowances nor any deduction (in respect of acquisition of the vehicle) under the cash basis has been claimed by the business.
Until 2012/13, the use of mileage rates was available only to the self-employed if the turnover of the business was below the VAT threshold when the vehicle concerned is first used for the purposes of the business.
From 2013/14 (with the legislation as drafted), a mileage deduction is available, regardless of the turnover level, if:
the business would otherwise be entitled to some deduction in respect of the vehicle; and
neither capital allowances nor any deduction (in respect of acquisition of the vehicle) under the cash basis has been claimed by the business.
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