using my car for consultancy work - query

[markmarkymark]

Hi All....

I know that an accountant can help here as can the tax website ( ) ... however I guess some of you might have a similar situation....

I have a full time job as an employee. I also have a consultancy (giving safety advice etc). I am a sole trader with respect to second job

We bought a Subaru WRX in July on a PCP contract, we put x up front, we pay Y a month and will finish with payment Z (or have another car etc etc). I was really bought for my wife, I do not need it for my main job.

However, I have now started using it about once a week for consultancy work. It struck me that although I only use it once a week, I am doing 9/10 of all the miles in anyone week. So, the question is can I and should I put it on the consultancy???

What happens? Do I claim back tax or perhaps reduce my tax bill in future years. Is it based on total cost of car or what I am paying back each month ?

Advice please !!

[Theodoric]

You also need to consider whether your car insurance covers you for your business work. I suspect that if you don't inform your insurer then they may have a get out clause if you have an accident.

[Ramrod]

You bought a Subaru WRX for your wife ?

btw......I believe you can only claim if you use your car between places of work. so the journey from home to work isn't covered.....unless you use home as a place of work.....and that doesn't mean you use home to do your accounts, you need to actually carry out your trade at home to qualify if you claim for travelling from your home to a workplace.....afaik

[snodvan]

Originally Posted by Theodoric

You also need to consider whether your car insurance covers you for your business work. I suspect that if you don't inform your insurer then they may have a get out clause if you have an accident.

I also have a sole trader consultancy etc and I need to travel about using my car - which was bought by "the business" ie all the interest on the loan was used to offset profts etc. The insurer advised that so long as I am only travelling to/ from a place of work, the mileage is modest (8K pa business _ domestic) and not carrying samples etc then there is no extra insurance liability. You declare the vehicle use on the tax form and either

a. Claim expenses ate the IR agreed rate per mile (around 60p, but varies with engine size etc). That is quite a generous allowance but is ALL that you can claim.

or

b. You keep EVERY receipt for use of the car (fuel, servicing, RAC, repairs/ replacements, maps for journeys - I mean everything) and a log of all mileage done for business purposes and domestic purposes. A big chore BUT then is your business mileage really is 90% of the vehicle mileage then you claim as a business expense 90% of everything you have spent on the vehicle.

I opt for plan b. - but my clients are now all overseas which is making things a bit tricky.

Get a good accountant - worth his/ her weight in gold. Mine charges £300 per year to sort out all my accounts and complete the tax form. If your tax form comes from a registered accountant and you have a modest turnover then you will not have problems.

[paulyoung666]

Originally Posted by snodvan

snip >>>>>>>


Get a good accountant - worth his/ her weight in gold. Mine charges £300 per year to sort out all my accounts and complete the tax form. If your tax form comes from a registered accountant and you have a modest turnover then you will not have problems.

and a very worthy piece of advice that is

[goldoni]

Now being a plumber and not an accountant I will let you know what I know. Providing you allocate some private mileage say 25% and to back this up you keep a mileage log, the man from the tax office say yes.

This includes road tax, insurance and all running costs As the car is on a PCP contract you should be able to claim the total cost of the contract less some private use.

You could phone the Tax office and ask the question and get it from the horse’s mouth.

Good point by Theodoric you defiantly need to advise your insurance company, bearing in mind you can claim for the insurance so no problem.

But I would advise you get a good accountant my books and advise cost me £299.00 per year and worth every penny

[markmarkymark]

Many thanks for all your inputs thus far - very helpful...

[markmarkymark]

Originally Posted by snodvan

b. You keep EVERY receipt for use of the car (fuel, servicing, RAC, repairs/ replacements, maps for journeys - I mean everything) and a log of all mileage done for business purposes and domestic purposes. A big chore BUT then is your business mileage really is 90% of the vehicle mileage then you claim as a business expense 90% of everything you have spent on the vehicle.

This sounds good. By 'spent on the vehicle' as a business expense, you do of course mean what you spend to buy that vehicle as well I guess? Had I bought for cash or simple lone I assume it would have been easy but I guess it might be a bit more complicated. e.g. I out 7K down which came out of my earnings from main job (i.e after tax). Some how I will need to adjust my tax to take that into account .... yep I do need an accountant!

[SMHarman]

Originally Posted by markmarkymark

This sounds good. By 'spent on the vehicle' as a business expense, you do of course mean what you spend to buy that vehicle as well I guess? Had I bought for cash or simple lone I assume it would have been easy but I guess it might be a bit more complicated. e.g. I out 7K down which came out of my earnings from main job (i.e after tax). Some how I will need to adjust my tax to take that into account .... yep I do need an accountant!

For a vehicle or any other asset their are capital costs and running costs.
For the running costs it is as said above the flat mileage rate offest against your income or the recipits and divide method.

Capital, well you don't (and the IR) don't want a big 0 tax bill every 3 years when you replace the vehicle, so these capital costs are divided over the useful economic life of the vehicle. As your vehicle is on PCP this is different again as the capital costs effectivly turn into a monthly finance cost and so are treated more like a running cost. The initial capital will be taken into account though.

While you are at this though, have you thought about all the other fab things you can deduct against being self employed? Home phone, used for business, then the line rental and calls, mobile, same, food and drink on the days you are out working. A share of your computer costs, printer costs, broadband costs if you use your pC for research, preparation of presentation papers, communicating by email. You can even offset some of the running costs of your house if that is your office too, though this has capital gains tax implications when you sell your house.

As said above, a good local tax accountant will sort you right, have all your income noted down and all the expenses specifically incurred.

And you probably do need Class 1 Business use on the car insurance, maybe Class 2, but as you are not a travelling salesman, carrying samples etc, Class 3 sounds like it is not necessary, call your insurance company. Elephant only wanted another £16 to change us from SDP to Class 2.

[goldoni]

A few years back I was investigated by the Inland Revenue, which took 13 months to complete as a tax inspector had her claws into me and would not let go. It would seem that I had done nothing wrong, but my name was pulled from a hat for investigation.

I have always had my accounts drawn up by an accountant and had never defaulted on any payment for NI or tax but I now have Miss tax inspector asking me silly questions, which I gave silly but truthful answers. The point of these silly questions was to trick me into admitting spending more than my earned income.

I have a car and work van, the van is 100% while the car I claim 75% as business use. She did try and get some private use for the van, but as I am a 24hr emergency call plumber I was allowed to keep the 100% for the van.

The one thing they did not like was the amount of money claimed for book keeping & secretarial work done by my wife. The money paid, as wages was not shown as being paid into her account but our joint account. While I did not pay them any money back for this oversight my wife had to open a bank account and transfer an amount each month and transfer it back into our joint account for all future payments.

The point in posting this is to warn any self employed person to keep all receipts and accounts for a period of six years, as this is the period they can go back and if something serious is found they can go back further.

Regarding my investigation I got it ended by phoning the chief tax inspector and in conversation said “you know a tree can be shaken for so long, but in the end it will loose all its leaves and die� The case was closed within 3 weeks and Miss tax inspector was moved sideways.