Car/fuel allowance - help!

[RJC09]

Just starting my business as a sole trader and I'm a bit confused about how to claim for car expenses. From what I can gather there are two options:

1. Apportionment - where you claim for a percentage of everything to do with your car i.e. if you use the car 70% for business and 30% for personal use - all fuel, insurance, repairs, etc, would be split like this and you'd claim 70% of each charge as an expense. VAT reclaimed would be a similar split.

2. Fixed rate business mileage - where you get 40p per mile for the first 10,000 miles business miles and 25p for every mile after this. But this allowance includes any fuel, repairs, insurance, etc, you have to do and can't reclaim any of these as expenses as it's part of the 40p/25p per mile allowance. You can then reclaim all VAT back on business miles.

Is this right? Anything I've misunderstood? Spoke to HMRC adviser and they didn't know!!!

Also, which do think is the best option financially? I'll probably do about 15,000 business miles a year, maybe a bit more.

Thanks in advance to anyone who can help.

Richard.

[elainec100@cheapaccounting]

Are you vat registered?

The info above looks about right.

What is best depends on the running costs of your car and how you have finance it - so you need to compare that to the mileage.

You sound pretty clued up - so I am sure you can do the calc.

[CassioAcc]

As Elaine says, it really depends on the exact details of the car.

[RJC09]

Elaine,

Just sent my VAT reg form away today.

The car is paid for, so no finance on it.

The only thing that worries me is that through the fixed rate mileage method - is that it could be possible that the money you spent on the car could exceed the amount you're allowed to claim back as an expense, and you could be left out of pocket - say your insurance went up dramatically, or you had to have loads of repairs done.

I just want the simplest and most cost effective option.

[RJC09]

Car is a 1.6 petrol 2001.

[MyAccountantOnline]

Car is a 1.6 petrol 2001.

Its the emissions of the car that is important so that you can look at the capital allowances due - if you want to see the rates I have them on my website - http://www.hjcca.co.uk/resources/tax_zone/tax_rates_and_allowances/tax_rates.php?r=24

[RJC09]

emmissions - 162g/km. how does this affect what i can claim?

[MyAccountantOnline]

You get a 10% writing down allowance on the car.

[RJC09]

Can you explain this? 10% of what?

[decorator73]

I might be wrong here but I think you can claim the 10% of the car's value under 'other capital allowances' maybe somebody else can explain why it is 10% and not the 20% usually allowed and also what to do if you've already owned the car for a while before you started the business- how would a value be calculated in that case?

I'm in a similar position- my car is 9 years old and has needed quite a few repairs, I also do lowish miles but use the car almost exclusively for the business so the apportionment works best for me- should be easy to do a spreadsheet and see which option works best for you.
Mike.

[elainec100@cheapaccounting]

It changes from 01/04/09, see here:

http://www.hmrc.gov.uk/pbr2008/pbrn17.pdf

Also note:

Expenditure incurred before April 2009 will, in general, continue to be
subject to the old “expensive” car rules for a transitional period of around
five years. (The Technical Note will provide full details.) After this
transitional period, any expenditure remaining in a single asset pool
(unless there is any non-business use of the car) will be transferred to the
main capital allowances pool.