Sole Trader Tax Question

[hast2]

Hi, I'm hoping some of the more experienced members might have encountered this problem before.

I'm looking to set up a new business in the new year, and have been reading the HMRC website, but can't find an answer to these 2 question.

1. Home expenses. I can see information about using a room in the house as an office, but what if you were using an existing outbuilding as a workshop - for example, a joiner preparing items before fitting a kitchen, like prebuilding units and machining worktops, or even just storage of materials between jobs.

2. Travel expenses. If I go to attend a trade show or go to a manufacturer of tooling premises to see a demo of equipment (lets say 200 or 300 miles away), it would be better to take my private car than the big company van. Can I claim back the mileage at the 45p per mile as an expenses to the business?

Thanks in advance

[Eric Mc]

hast2 said:

Hi, I'm hoping some of the more experienced members might have encountered this problem before.

I'm looking to set up a new business in the new year, and have been reading the HMRC website, but can't find an answer to these 2 question.

1. Home expenses. I can see information about using a room in the house as an office, but what if you were using an existing outbuilding as a workshop - for example, a joiner preparing items before fitting a kitchen, like prebuilding units and machining worktops, or even just storage of materials between jobs.

2. Travel expenses. If I go to attend a trade show or go to a manufacturer of tooling premises to see a demo of equipment (lets say 200 or 300 miles away), it would be better to take my private car than the big company van. Can I claim back the mileage at the 45p per mile as an expenses to the business?

Thanks in advance

Use of Home Office - Use the normal apportionment formula but count the outdoor building as another room in the house

Mileage - you can make a claim at 45p per mile for business miles incurred up to 10,0000 miles and 25p thereafter. The examples you give above would count as legitimate business miles.

How are you currently making your motor expense claims in respect of the business van?

You use the term "company van" but the question states you are a sole trader. I am assuming you are NOT operating your business through a limited company.

[hast2]

I would be a Sole Trader and it would be a van for business use. I just used "company van" as a generic term.

I haven't started trading yet, but was looking into the tax situation as was trying to work out if I should claim for the van under "capital allowances" or use the "simplified" expenses of the 45p and 25p per mile. I think as far as the van is concerned I will have to wait and see how much miles I end up doing with it and do some calculations from there.

Thanks for your input.

[Eric Mc]

If you claimed under "Capital Allowances", you can claim 100% of the cost of the van against your business profits in the year you purchased the van.

Note, you can only claim Capital Allowances when you actually buy something. Leased assets are not eligible for capital allowances - because you don't own them.

[Countdown]

hast2 said:

I would be a Sole Trader and it would be a van for business use. I just used "company van" as a generic term.

I haven't started trading yet, but was looking into the tax situation as was trying to work out if I should claim for the van under "capital allowances" or use the "simplified" expenses of the 45p and 25p per mile. I think as far as the van is concerned I will have to wait and see how much miles I end up doing with it and do some calculations from there.

Thanks for your input.

As you say it depends on how new the van is/how much it cost and how many miles you do.

If it's an old/cheap van and you do multi-mega miles it's going to be better claiming ppm.

If it's a new/expensive van and/or you only do a few miles then capital allowances is going to be more beneficial than claiming mileage.

[Eric Mc]

On the assumption that it is a new or fairly new van and you have actually bought it (not leased), then I would -

claim the Capital Allowances on the van
claim the ACTUAL running costs of the van
if you use a non business vehicle now and then, claim the "business only" proportion of the running costs of the non-business car

[hast2]

Thanks Countdown and Eric Mc

The van will be about 5 years old. Just going to have to wait and see how much mileage I do and what other costs I have.

Due to needing to buy a few bits of equipment (around £20k) and needing to build a up some customers, I'm really not to sure how busy I'll be and how much I'll make in the first year. I have planned for worst case scenario, but I might not make a profit of over £11k after all my other running expenses, therefore I might need to play about with writing stuff down over a few years, or using simplified taxes on the van. But I'm also aware that these decisions will follow me every year as long as I own that asset. And what might be the right decision for this year might not be for the following years.

Until I know roughly how things are panning out in the first year, I won't really know.

Still working in my Full Time job at the moment and as I have few idyll moments I'm just looking at all the possible scenarios.

[Eric Mc]

A few idyll moments? Sounds like you already have the dream job .

[hast2]

It was, then we had a reorganisation of management and the structure of reporting. The job now has no direction and loads of internal bickering and point scoring between departments. I've never felt so worthless in a job. 14 years I've been there and it's a massive weight off my shoulders now I've decided to leave and start up something new. Can't wait and really looking forward to the challenge

[Eric Mc]

Hopefully, you will find your ideal idyll where you can idle.

[TcA1968]

Other things you might need to consider:

1) You might need permission from your mortgage provider or landlord

2) Sometimes you need permission from your local council if having lots of deliveries and the like

3) Business insurance - your home insurance won't cover your business stock

4) Business rates may be payable on the part of your property you operate your business from

[hast2]

TcA1968 said:

Other things you might need to consider:

1) You might need permission from your mortgage provider or landlord

2) Sometimes you need permission from your local council if having lots of deliveries and the like

3) Business insurance - your home insurance won't cover your business stock

4) Business rates may be payable on the part of your property you operate your business from

I've already looked into the insurance situation.

No need to worry about permission from the mortgage provider

The space will mainly be tied up with stock and tooling, which means I won't be able to use it for anything else. I won't be using my home as a workshop or anything like that, well no more than any self employed joiner/plumber type of self employed person, therefore I don't think that Business rates will be applicable, but I'll have a bit of a look on my local authorities website just to be sure.

Thanks,

[Eric Mc]

If you are not materially changing your domestic residence in order to to run the business, most councils are not too concerned.

The other area that could be affected is the normal exemption from Capital Gains Tax that applies to main residences. If a house is converted to allow a business to be run from it, the converted part of the building may be subject to Capital Gains Tax when the property is eventually disposed of. However, using a garage or a shed for storage or using a bedroom as an office will not be a problem in this area.