Car expenses: Not always clear in practice#AskAMS

A company, a sole trader or a partnership can claim motor/travel expenses incurred “wholly and exclusively” for the trade. However, it’s not so clear in practice.

Sole Trader/Partnerships

There are two ways to claim car costs: actual costs and mileage. If they use a car for their business, they can claim ‘actual costs’, including running costs – fuel, repairs, insurance and road tax. They should keep records of business/private mileage – and reduce the costs they claim by a “private Proportion”.

Also, the car purchase can also be claimed as a ‘capital allowance’. OR, they just claim for business mileage (see below).

Limited Companies

Typically, Directors pay a lot of tax if they have a company car, so it’s more common for them to use their own car and claim for business mileage instead. Business miles are claimed at 45p on the first 10,000 business miles and after that 25p per mile. Some sole-traders/partnerships use this method – especially when they don’t drive many miles for business.

You must continue with the chosen method for the life of the vehicle.