What is a tax dedcutible expense for when claiming for motor vehicles and associated travel costs from your limited company is often misunderstood.

Company car costs

If you have a company car then your company can pay the costs relating to the upkeep and maintenance of the vehicle, such as service costs, new tyres, road tax and insurance costs. As a company asset the company pays to maintain it. It gains tax relief and claims VAT where appropriate.

Company car fuel

The company can pay for all fuel for the car on behalf of an employee but the individual who drives the car would be subject to a benefit in kind on the fuel they use. HMRC’s argument being some private mileage will have been completed.

If an individual pays for their own fuel whilst using a company car they can claim expenses for the miles completed on business journeys, rates can be found here.

Personal vehicles

If a private vehicle is used for company business by an employee or a company director, then the rules are very different yet clear.

No expenses relating to a privately owned car may be paid for by a company. For example service costs, repairs, motor insurance and new tyres all must be paid for personally by the individual who owns the asset (car).

What can be claimed

An individual is however entitled to claim expenses from a Limited company for business mileage completed in their personal car. Other costs that can be claimed when travelling are discussed in this article.

The claim must be for journeys completed in the course of business, for example driving to visit a customer or supplier. You cannot claim for a journey to your principle place of work, even if you work from home two days and travel to an office 3 days, HMRC would deem both to be your main place of work.

Mileage rates for privately owned cars

• 45p a mile for the first 10,000 miles (petrol/diesel)
• 25p a mile for the miles over 10,000 (petrol/diesel)
• 8p a mile for electric cars

Calculating claims

Claims needs to state who was visited, on what date and how far the journey was. Best practice is to complete an expense claim each month.

There are several apps that can do this we like to use tripcatcher it links to google maps and Xero making it quick and easy to complete a claim each month. It also completes the VAT calculation for you so maxmise every penny of your expense claim!

Conclusion

Make sure you aren’t claiming for costs that are not allowable. Understand what you can claim for dependent on who owns the vehicle, the business or an individual. Once you are clear maximise what you can claim for within the rules provided!…