Tax relief on car finance interest
Discussion
I'll keep this one short and simple.
A colleague claims that as an employee using your own car for business, as well as the tax relief (MAR) on the business miles, you can claim relief on the finance interest charges for the car. He also says he's been doing it for years, and HMRC have never questioned it.
Can anyone tell me if this is true?
Many thanks in advance
A colleague claims that as an employee using your own car for business, as well as the tax relief (MAR) on the business miles, you can claim relief on the finance interest charges for the car. He also says he's been doing it for years, and HMRC have never questioned it.
Can anyone tell me if this is true?
Many thanks in advance
There are a number of issues which would determine whether tax relief could be obtained.
First of all (and most importantly) the test for claiming expenses as an employee is a much stricter test than claiming an expense as a self employed individual.
An employee has to show that the expense was incurred "wholly, exclusively and neccessarilly in the carrying out of their duty as an employee".
The test for a self employed individual is "wholly and exclusively" only.
Therefore, the use of the car has to have been a condition of the employment.
Then there is the nature of the finance agreement to consider. What can be claimed as an offset against taxable income is dependent on the nature of the agreement i.e. is it a finance lease or an operating lease or an HP.
As the previous poster suggests, perhaps making a claim based on the allowed mileage rates might be more appropriate (they are available to employees too).
First of all (and most importantly) the test for claiming expenses as an employee is a much stricter test than claiming an expense as a self employed individual.
An employee has to show that the expense was incurred "wholly, exclusively and neccessarilly in the carrying out of their duty as an employee".
The test for a self employed individual is "wholly and exclusively" only.
Therefore, the use of the car has to have been a condition of the employment.
Then there is the nature of the finance agreement to consider. What can be claimed as an offset against taxable income is dependent on the nature of the agreement i.e. is it a finance lease or an operating lease or an HP.
As the previous poster suggests, perhaps making a claim based on the allowed mileage rates might be more appropriate (they are available to employees too).
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