Self employed - Using two vehicles

[K2 Accountancy]

A self employed individual uses both his van (owned) and his car (leased) as part of his business activities. The HMRC approved mileage rates are used for the van but a query has been raised as to whether the restricted lease costs, apportioned for private use can be used for the car.

My initial thoughts were that you need to be consistent and it is clearly in the HMRC guidance that you need to be consistent once you have made the decision on a particular vehicle. However, I can't find anything that prohibits the use of the lease cost on the car, providing that no mileage rate has been used regarding the specific vehicle in the past.

It will make a decent difference as the car only does a few thousand miles a year so the mileage rate would be less than the apportioned lease cost, even after adjusting for private use.

 

[Adam (EBS)]

A self employed individual uses both his van (owned) and his car (leased) as part of his business activities. The HMRC approved mileage rates are used for the van but a query has been raised as to whether the restricted lease costs, apportioned for private use can be used for the car.

My initial thoughts were that you need to be consistent and it is clearly in the HMRC guidance that you need to be consistent once you have made the decision on a particular vehicle. However, I can't find anything that prohibits the use of the lease cost on the car, providing that no mileage rate has been used regarding the specific vehicle in the past.

It will make a decent difference as the car only does a few thousand miles a year so the mileage rate would be less than the apportioned lease cost, even after adjusting for private use.

As far as I know, if this is a limited company you are both the director and an employee. The business and claim tax relief on the car.

However, but what about using the car as a private individual? If the car to be used personally, then tax is applied - ‘benefit in kind’. This is payable on your self-assessment for the benefit of using the car.

The calculation for the BIK is based on the list price of the car when it was new (not the price you paid or the second hand valuation).

Makes no difference if the car was bought out right, or leased. The amount of private use is also not taken into consideration. It’s either applied, or not applied, so unless the car is used strictly only for business and left at the business overnight, then you will be taxed for private use.

The percentage applied is based once again on the Co2 emissions of the car, ranging from high; 37% high for a gas guzzler, to low; 7% for a hybrid or electric car.

 

[K2 Accountancy]

As far as I know, if this is a limited company you are both the director and an employee. The business and claim tax relief on the car.

However, but what about using the car as a private individual? If the car to be used personally, then tax is applied - ‘benefit in kind’. This is payable on your self-assessment for the benefit of using the car.

The calculation for the BIK is based on the list price of the car when it was new (not the price you paid or the second hand valuation).

Makes no difference if the car was bought out right, or leased. The amount of private use is also not taken into consideration. It’s either applied, or not applied, so unless the car is used strictly only for business and left at the business overnight, then you will be taxed for private use.

The percentage applied is based once again on the Co2 emissions of the car, ranging from high; 37% high for a gas guzzler, to low; 7% for a hybrid or electric car.

Thank you for the response Adam.

The individual in question is self employed so the BIK rules will not apply as they would in a LTD

 

[Adam (EBS)]

If the vehicle is used for personal use then you can claim the monthly cost of the lease against profits. The percentage of how much you can claim back varies. If it emits more than 160 g/km then you can claim 85% back. If it emits less, then you can claim 100% back. This is in an attempt at encouraging manufacturers to make cars that create less pollution.

 

[Adam93]

If they use the car for business purposes, they can claim expenses as normal based on the percentaged used for business reasons.

As above, another deduction of 15% is required on top of the personal usage restriction if the car is considered to have high emissions (130 g/km or more I believe).

I would keep a mileage log as HMRC will question the business use of the car if there is a van as well.

Depending on the sums involved, I would be inclined to just claim business mileage to keep things tidy.