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Can I put my car / vehicle through my business?

The quick answer is yes, if you're travelling for business. There are two methods of using your vehicle for business.

When you're a sole trader there's legally no difference between you and your business, so there’s no such thing as a ‘company car’. That being said you can still claim certain expenses.

Splitting business and personal use

You'll have to establish the proportion of which you use the car for business and personal use. HMRC are very unlikely to accept that a vehicle is used 100% for business, unless it’s something like a van with your logo on the side, or a taxi.

The car will almost certainly have some private use as well as business use. For example, you might use it mainly to travel to visit clients, but you’ll also use it to go food shopping. As tempting as it may be to pull the wool over their eyes, honesty is the best policy.

How do I work out the business proportion?

It's important to establish a clear proportion for how much the car is used for business and how much for personal use. HMRC don’t like it if you just make a best guess, so you need to keep a mileage log.

What to claim?

The full cost method

This involves adding up everything you’ve spent on the car during the year (petrol, servicing, repairs, MOT), then working out the ‘business proportion’ of that, depending on how much you've used the car for business journeys.

You’ll also be able to claim capital allowances on the business proportion of the initial cost of the car.

The mileage method

If you're using a vehicle you have owned for a while and it has little value, claiming mileage instead might be the best option.

You use HMRC's AMAP (Approved Mileage Allowance Payments) rate for the kind of vehicle you’re using.

When you bought the vehicle your business’s annual turnover was under the VAT registration threshold at that time (which is currently £85,000). It doesn't actually matter in this case whether your business is registered for VAT or not - HMRC just use that threshold for ease of reference. Please note that if your business’s annual sales were over the VAT registration threshold when you bought the vehicle, you can’t use the mileage method.

You don’t claim any other costs for running that car. These are all covered by HMRC's AMAP rate, so you can’t claim for things like servicing, repairs, MOT or wear and tear (however, you can claim the business part of interest on a loan you’ve taken out to buy the vehicle).

Once you’ve chosen to use this method, you must keep using it until you sell that car and buy another one. You can’t change from the mileage method to the full-cost method, or back again, unless you change vehicles. And remember, when you buy the new vehicle, your business’s annual turnover must be under the VAT registration threshold at that time.

Last Updated: 13 Dec 2017 08:30AM GMT
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