Mileage Allowance

Gilbert2

Hello

Bit of help please, concerning tax year 11/12, my wife and I have no experience of self employment.

My wife worked with a friend during this tax year, both were self employed domestic cleaners.

My wife doesn't drive, the other lady did.

My wife was therefore a passenger in her friend's car and paid her £10 per week, for just 14 business miles, which is about 70p per mile.

A number of questions please-

1 Can my wife claim mileage allowance? I guess at 45p per mile?

If so, what is the 25p difference (70p - 45p) classed as, a profit for her friend?

2 Will the friend also claim mileage allowance at 45p?

3 Is it not the case that the friend will therefore have been paid at 70p per mile by my wife but will also receive a 45p tax break on top which, I guess, effectively makes it £1.15 she receives for mileage???

4 My wife's friend now also tells us that she didn't have business cover on her insurance for this tax period, just social, domestic and cummuting, so, how can either my wife or her friend claim business mileage when the car wasn't insured for that purpose? Is it even lawful?

I mean, one cannot claim pension relief if one has no pension, surely?

(Apparently, she should have had business class 3 as they were transporting their equipment and also cold calling for customers)

Thanks.

00ec25

Gilbert2 wrote: »

My wife worked with a friend during this tax year, both were self employed domestic cleaners..

if you are certain that they are genuinely self employed then each person claims their own cost of travel to their clients

friend owns and drives a car so is restricted to the HMRC limit of 45ppm if she wants to do the ppm method. The £10 she gets from your wife is simply £10 cash and is part of her total taxable income, it has nothing to do with a ppm calculation, so she wil be taxed in full on that £10

wife does not own a car so cannot claim 45ppm as she had no car related costs. Her status as a passenger is irrelevant - eg. you can't claim 45ppm just because you are sitting on a bus. However, she can claim the cost she actually incurred in travelling to work , ie £10, as a charge against her profits - she wil therefore pay out £10 and recoup £2 of it as a tax saving. She would be best advised to get a receipt from her friend so there is a paper trail to support wife's cost on her SA return

Gilbert2 wrote: »

My wife's friend now also tells us that she didn't have business cover on her insurance for this tax period, just social, domestic and cummuting, so, how can either my wife or her friend claim business mileage when the car wasn't insured for that purpose? Is it even lawful?

I mean, one cannot claim pension relief if one has no pension, surely?

(Apparently, she should have had business class 3 as they were transporting their equipment and also cold calling for customers)

HMRC have no interest in whether there was any insurancne in place at all, all they want to know is whether she is genuinely self employed and therefore able to claim travel costs to start with

of course there is a legal aspect - it concerns whether your friend would end up being charged by the police for driving without insurance if she had an accident. Your friend's insurance company would not have paid out since her policy is invalid. She is not commuting to a single place of employment, she is self employed and is travelling to her multi location clients - aka business use, BIG difference. The fact she is in additon carrying equipment is not the reason its business class , that is defined by the multiple locations. However having equipment on board may lead to addiitonal premium since that too forms part of the insured value

be thankful there was no accident so no failed accident claim. Your friend needs to check what else she has got wrong about her business arrangements and should tell insurance comanies what she's doing not make guesses when she takes out a policy. I hope wife and friend have correct liability insurance for their self employed status !