Business mileage and HMRC
Discussion
Hi Guys,
In the situation where a contractor uses his private vehicle to drive from site to site and is paid less than £0.40 per mile. The contractor is using his own limited company and on other work claims £0.40 per business mile. Mileage sheets showing journeys made are completed on a monthly basis.
An article I was reading the other day suggested that if a client paid less than £0.40 per mile, then tax relief could be claimed on the balance, I assume this means corporation tax rather than income tax
Was the article correct, and if so where and how is it shown to satisfy HMRC?
If not what does the panel think is the most tax efficient way of dealing with business mileage in the >10K per anum bracket.
Regards,
Brian (and a RED 350i) which isn't used for business!
In the situation where a contractor uses his private vehicle to drive from site to site and is paid less than £0.40 per mile. The contractor is using his own limited company and on other work claims £0.40 per business mile. Mileage sheets showing journeys made are completed on a monthly basis.
An article I was reading the other day suggested that if a client paid less than £0.40 per mile, then tax relief could be claimed on the balance, I assume this means corporation tax rather than income tax
Was the article correct, and if so where and how is it shown to satisfy HMRC?
If not what does the panel think is the most tax efficient way of dealing with business mileage in the >10K per anum bracket.
Regards,
Brian (and a RED 350i) which isn't used for business!
A contractor does not "claim" mileage from the people for whom he is doing work. He "bills" his customers for the work he does and, if he wants to recover mileage or any other travel related costs, he either includes additional amounts in his overall invoices to cover these costs or he raises separate invoices. Whether he wants to recover the exact mileage/travel costs from his customers or whether he wants to recover the costs with a built in additional profit element is up to him or the terms of the original agreement.
Obviously, travel and mileage costs recovered in this way are part of the overall sales/fee income of his limited company and will contribute towards its profits and ultimately generate additional Corporation Tax liabilities. They will also be subject to Output VAT (just like ordinary sales).
A separate issue is whether the individual want to claim mileage from his own company. As he is a director/employee, he can make muleage claims from his own comany up to the usual limits - 40p per mile up to 10,000 business miles and 25p thereafter. It is a useful way of extracting money from your own company free of Income Tax and National Insurance - if it is a feasible thing to do.
I think that it is important that those running contracting companies get out of the employee mindset and realise that they are holding themselves out to be a commercial trading entity. They should ensure that all their paperwork reflects this different atitude to what they do and how they do it.
So, out with "Mileage Claims" and in with "Additional Billing".
Obviously, travel and mileage costs recovered in this way are part of the overall sales/fee income of his limited company and will contribute towards its profits and ultimately generate additional Corporation Tax liabilities. They will also be subject to Output VAT (just like ordinary sales).
A separate issue is whether the individual want to claim mileage from his own company. As he is a director/employee, he can make muleage claims from his own comany up to the usual limits - 40p per mile up to 10,000 business miles and 25p thereafter. It is a useful way of extracting money from your own company free of Income Tax and National Insurance - if it is a feasible thing to do.
I think that it is important that those running contracting companies get out of the employee mindset and realise that they are holding themselves out to be a commercial trading entity. They should ensure that all their paperwork reflects this different atitude to what they do and how they do it.
So, out with "Mileage Claims" and in with "Additional Billing".
Edited by Eric Mc on Thursday 24th January 09:42
Have just finished a 3 month battle with Hays about billing for mileage expenses.
Got the expenses, on my own company expenses sheet, signed and sent. Was sent back with a "temporary employee mileage claim sheet" to fill in. Back it went. Back it came.
"It is Hays policy for you to use this, nothing we can do".
"It is my company policy that we chase all outstanding debt, see you in court". Cheque arrives.
Got the expenses, on my own company expenses sheet, signed and sent. Was sent back with a "temporary employee mileage claim sheet" to fill in. Back it went. Back it came.
"It is Hays policy for you to use this, nothing we can do".
"It is my company policy that we chase all outstanding debt, see you in court". Cheque arrives.
Yes, but many agents just don't "get" you sending in an invoice and a contractor's company sheet describing the detail. It is often painful.
It is hard enough explaining to the client why they are "paying" VAT on the VAT.
Or are you suggesting that the whole exchange should not have happened ? What should I have done ? I thought by refusing to fil in THEIR expenses sheet I was doing the right thing ?
It is hard enough explaining to the client why they are "paying" VAT on the VAT.
Or are you suggesting that the whole exchange should not have happened ? What should I have done ? I thought by refusing to fil in THEIR expenses sheet I was doing the right thing ?
Using your own "in house" generated sheet is definitely better than using theirs. However, the key piece of paper needs to be a proper, business headed invoice.
If you produce one of them as well as the expense claim form that should take care of the matter. The important thing is that the basic document that you use in your business to arrive at the overall sales or fee income for the year needs to an invoice, not expense claim forms (no matter whose paperwork these claims are written on).
If you produce one of them as well as the expense claim form that should take care of the matter. The important thing is that the basic document that you use in your business to arrive at the overall sales or fee income for the year needs to an invoice, not expense claim forms (no matter whose paperwork these claims are written on).
Thanks guys,
Eric has already answered my next question, which would have been similar to the point raised by Noger. Glad to hear I've been doing that bit right!
However, going back to my main point..
Contractually if I can only bill the client say £0.30 per mile (by completing agency's claim form + company invoice) which would normally be passed direct to the director or whoever incurring the expense, usually at month end just to make it simple.
As Plotloss suggests and as I have read can the balance of £0.10 per mile be used for either corporation or income tax relief?
Is this my question similar to the "Business milage - cost per mile" thread running. In that using SA the director or whoever can claim the balance as relief from personal income tax.
Regards,
Brian (and a RED 350i)
Eric has already answered my next question, which would have been similar to the point raised by Noger. Glad to hear I've been doing that bit right!
However, going back to my main point..
Contractually if I can only bill the client say £0.30 per mile (by completing agency's claim form + company invoice) which would normally be passed direct to the director or whoever incurring the expense, usually at month end just to make it simple.
As Plotloss suggests and as I have read can the balance of £0.10 per mile be used for either corporation or income tax relief?
Is this my question similar to the "Business milage - cost per mile" thread running. In that using SA the director or whoever can claim the balance as relief from personal income tax.
Regards,
Brian (and a RED 350i)
What you chose to recover from your customer is a business matter, not a tax matter. The Revenue couldn't care less if you charge your customer .30p per mile or £30.00 per mile.
YOU can reclaim from your own company mileage up to 40p per mile.
There is no direct link between what you are billing your customer mileage wise and how much mileage you want to claim from your own company.
YOU can reclaim from your own company mileage up to 40p per mile.
There is no direct link between what you are billing your customer mileage wise and how much mileage you want to claim from your own company.
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