HMRC mileage allowance - is it ever going to change?
Discussion
Is this ever going to change? I'm sure the upper rate was 45p per mile a few years ago and with the almost doubling of fuel prices since 2002, the 40p a mile isn't representative of the cost of running a car anymore. With all tehgreenies around, I'm not sure whether Hector is going to do anything about this.
http://www.hmrc.gov.uk/manuals/eimanual/EIM31240.h...
http://www.hmrc.gov.uk/manuals/eimanual/EIM31240.h...
CIS121 said:
Is this ever going to change? I'm sure the upper rate was 45p per mile a few years ago and with the almost doubling of fuel prices since 2002, the 40p a mile isn't representative of the cost of running a car anymore. With all tehgreenies around, I'm not sure whether Hector is going to do anything about this.
http://www.hmrc.gov.uk/manuals/eimanual/EIM31240.h...
That article is hilarious.http://www.hmrc.gov.uk/manuals/eimanual/EIM31240.h...
Apparently it only costs twice as much to run a car as it does a bicycle.
This government genuinely has to go.
groomi said:
In what way have the capital costs reduced?
The biggest cost of motoring is depreciation and that has fallen, as has the cost of servicing, imagine trying to get to 99,000 miles with only four services ten years ago. Tyres are also cheaper. So although the fuel cost has risen, the rest of the cost sf running a car has fallen, so overall its about the same.Now if you're running your own company there's no need to use the 40p / 25p per mile rule, you can use actual expenditure of the business part of your car usage, see a recent Eric_MC post for details.
spikeyhead said:
groomi said:
In what way have the capital costs reduced?
The biggest cost of motoring is depreciation and that has fallen, as has the cost of servicing, imagine trying to get to 99,000 miles with only four services ten years ago. Tyres are also cheaper. So although the fuel cost has risen, the rest of the cost sf running a car has fallen, so overall its about the same.Now if you're running your own company there's no need to use the 40p / 25p per mile rule, you can use actual expenditure of the business part of your car usage, see a recent Eric_MC post for details.
There are two techniques that can be used to claim motor expenses ina business.
The normal way motor expenses are claimed in a business is that all business related motor expenses are put through the business accounts. These expenses are based on the actual physical costs i.e. fuel vouchers, vehicle repairs, insurance, road tax etc etc.
A sole trader can only claim expenses that have been incurred "wholly and exclusively for the purpose of the trade" so an attempt MUST be made to ensure that the expenses claimed in the business accounts are the business related motoring costs only.
This is usually achieved by making a note of the actual business mileage incurred in the accounting year.
The business element of the motoring costs are then calculated by apportioning the total costs for the year by comparing the business mileage to the total mileage.
Capital Allowances can also be claimed on the vehicle - subject to a maximum claim of £3,000 per annum. The Capital Allowance rate claimable on cars is 25% per annum. Like the general motoring costs, the Capital Allowances should also be restricted by the business mileage versus total mileage ratio.
A simpler alternative is to ignore all the above a put through a 40p/25p per mile claim instead - based on the business mileage for your sole-trading activity.
Please note that these two techniques work best in sole trader/partnerships.
Limited company are a bit different.
The normal way motor expenses are claimed in a business is that all business related motor expenses are put through the business accounts. These expenses are based on the actual physical costs i.e. fuel vouchers, vehicle repairs, insurance, road tax etc etc.
A sole trader can only claim expenses that have been incurred "wholly and exclusively for the purpose of the trade" so an attempt MUST be made to ensure that the expenses claimed in the business accounts are the business related motoring costs only.
This is usually achieved by making a note of the actual business mileage incurred in the accounting year.
The business element of the motoring costs are then calculated by apportioning the total costs for the year by comparing the business mileage to the total mileage.
Capital Allowances can also be claimed on the vehicle - subject to a maximum claim of £3,000 per annum. The Capital Allowance rate claimable on cars is 25% per annum. Like the general motoring costs, the Capital Allowances should also be restricted by the business mileage versus total mileage ratio.
A simpler alternative is to ignore all the above a put through a 40p/25p per mile claim instead - based on the business mileage for your sole-trading activity.
Please note that these two techniques work best in sole trader/partnerships.
Limited company are a bit different.
For a business to push through its books and records all the actual motoring costs (including Capital Allowances), it really needs to ensure that the vehicle is actually owned by the business and shown in the business' Balance Sheet.
This is not a big deal for sole-traders and partnerships. Any non-business useage is taken care of by the "private use" adjustment mentioned in my earlier post.
The problem with limited companies is that, if the company owns the vehicle, the car becomes a Company Car and the "private useage" element is dealt with under the Benefits in Kind system - which can work out very expensive for the individual and teh company.
It is because of the BIK system, that many directors and employees opt for a "pence per mile" mileage claim system rather than the Company Car system.
This is not a big deal for sole-traders and partnerships. Any non-business useage is taken care of by the "private use" adjustment mentioned in my earlier post.
The problem with limited companies is that, if the company owns the vehicle, the car becomes a Company Car and the "private useage" element is dealt with under the Benefits in Kind system - which can work out very expensive for the individual and teh company.
It is because of the BIK system, that many directors and employees opt for a "pence per mile" mileage claim system rather than the Company Car system.
Eric Mc said:
For a business to push through its books and records all the actual motoring costs (including Capital Allowances), it really needs to ensure that the vehicle is actually owned by the business and shown in the business' Balance Sheet.
This is not a big deal for sole-traders and partnerships. Any non-business useage is taken care of by the "private use" adjustment mentioned in my earlier post.
The problem with limited companies is that, if the company owns the vehicle, the car becomes a Company Car and the "private useage" element is dealt with under the Benefits in Kind system - which can work out very expensive for the individual and teh company.
It is because of the BIK system, that many directors and employees opt for a "pence per mile" mileage claim system rather than the Company Car system.
Exactly as I understood it Eric, but I was unsure if the poster had found an alternative method of funding that didn't make the car/running expenses a benefit in kind if you own a Ltd Co.This is not a big deal for sole-traders and partnerships. Any non-business useage is taken care of by the "private use" adjustment mentioned in my earlier post.
The problem with limited companies is that, if the company owns the vehicle, the car becomes a Company Car and the "private useage" element is dealt with under the Benefits in Kind system - which can work out very expensive for the individual and teh company.
It is because of the BIK system, that many directors and employees opt for a "pence per mile" mileage claim system rather than the Company Car system.
Interesting, my wife is about to swap from company car, I also run my car on the IR mileage rates, but, what if the car is run privately through an allowance, that allowance is not great and the fuel is paid for by the company and the company makes a deduction from earnings for that private mileage, is there anything additional the private individual can claim by way of tax return at the end of the year to compensate for the poor allowance?
taffyracer said:
what if the car is run privately through an allowance, that allowance is not great and the fuel is paid for by the company and the company makes a deduction from earnings for that private mileage,
I think that's a pretty unusual way of doing things?Normally the company would pay a mileage allowance on a car run privately - my previous company paid 15p/mile. So you can then claim the tax back on the difference between that and the IR rated of 40p/25p.
So, for a 40% tax payer you get 40% of 25p (40p-15p) back for the first 10K miles, then 40% of 10p (25p-15p) back for anything over 10K miles.
Off the top of my head, I can't think how it would work if the company provided all fuel, then took back the provate cost. Perhaps you could use HMRC's advisory fuel rates http://www.hmrc.gov.uk/cars/advisory_fuel_current.... but they're meant for company owned cars?
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