Lease Car Expenses

Trancerii

Hi all, hope someone can help with this, as I’ve been looking everywhere for answers.

So in terms of claiming expenses on a car self employed, I know you can do flat rate or actual cost.  From what I understand, if you do flat rate, you simply claim 45p a mile (under 10k) and that’s it, that’s all you can claim for. But with ‘Actual Cost’ you claim for everything separately for the amount you use the car for business.

The thing is, this flat rate doesn’t even come close to covering all the costs of a car for business - Servicing, fuel, MOT, tyres, monthly cost of the lease.

Under Actual Cost, they say you can still claim 45p a mile for your business millage. But that would be on top of being able to claim all the other costs of the car.  So what am I missing here?

A vehicle is a huge expense of the business so I’m trying to understand exactly what I can claim for here?

Can anyone help?

DullGreyGuy

Flat rate was never intended to cover the cost of a lease, it is due to cover the wear & tear/ depreciation not the cost of purchase. 

Looking at a random lease deal they charge 4.3p per mile over the agreed, given that includes taxes and profit margins and is intended to be close to punitive the per mile for the vehicle itself should be less than that. 

Trancerii

If the car is mainly for business use, why can’t the purchase cost be claimed as an expense?

BoGoF

What are you reading that says you can claim 45p if you claim the actual costs?

Trancerii

I attended a recent QA webinar with HMRC, and asked the following:

Audience Question

Q: If you’re using the actual cost system, what is the price per mile you can claim for business mileage?

A: The price per mile is related to the simplified expenses. They are 45p for the first 10,000 miles and 25p per mile thereafter. Please see gov.uk/simpler-income-tax-simplified-expenses/vehicles-

BoGoF

Trancerii said:

I attended a recent QA webinar with HMRC, and asked the following:

Audience Question

Q: If you’re using the actual cost system, what is the price per mile you can claim for business mileage?

A: The price per mile is related to the simplified expenses. They are 45p for the first 10,000 miles and 25p per mile thereafter. Please see gov.uk/simpler-income-tax-simplified-expenses/vehicles-

Well, that is duff info and even the link confirms that - "You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits."

DullGreyGuy

Trancerii said:

If the car is mainly for business use, why can’t the purchase cost be claimed as an expense?

Because a car is a capital asset not an expense... you can claim for it when you buy it but then cannot use simplified expenses. Remember as its now a business asset that it also goes through the business books when you dispose of it

uknick

What type of lease are you paying for the car?  At the end of the lease will you own the car or will it got back and you start again?

The tax treatment of the lease will depend on whether you are buying the car or just renting it. 

Albermarle

Let's say for simplicity that you own a medium sized car that you also use for business purposes.

You drive 100 miles on business.

Fuel cost - £15

There is a rule of thumb that the cost of wear and tear and depreciation is similar/less than the fuel cost, so lets say £25 max .

£40 for 100 miles= 40p a mile.

Trancerii

From what I’m beginning to understand, if you use the actual cost method for the car, you don’t claim the mileage as 45p a mile.  You would claim the business portion of the fuel costs you paid?  Is that right?  

Example:
You work out from your total mileage that you use the car 75% for business.

You spend £1,000 on petrol throughout the year

You can claim £750 in fuel as a business expense?

Have I got that right? In terms of the lease type, the car just gets returned at the end of the lease. So it’s purely rented.

Grumpy_chap

Trancerii said:

I attended a recent QA webinar with HMRC, and asked the following:

Audience Question

Q: If you’re using the actual cost system, what is the price per mile you can claim for business mileage?

A: The price per mile is related to the simplified expenses. They are 45p for the first 10,000 miles and 25p per mile thereafter. Please see gov.uk/simpler-income-tax-simplified-expenses/vehicles-

That seems like a typical webinar question with an over-simplified answer.
The question is incorrect in that it conflates "actual cost" with "price per mile".  The "price per mile" only really applies if using simplified expenses. It would not be applicable in anything like the same way of using an actual cost approach.

How many business miles are you doing that means you do not consider the approved mileage rates to be adequate?
What do you think your actual costs are in excess of this amount?
Remember, the simplified rate is to cover the direct cost of the business mileage (fuel) plus a proportion (to reflect the increase associated with the extra mileage) of the depreciation, maintenance, insurance etc.