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Mileage Allowance

Hi,

The company's year end is 30 June 2011. The director has done 20000 miles during the year which he wants to claim from his limited company.He is the only director and shareholder in the company. I want your advise on my following mileage allowance workings which would be claimed in the company's annual accounts,

Tax Year 2010-11                               Tax Year 2011-12            Total

15,000  miles                                       5000 Miles                       20000 miles

10,[email protected]          [email protected]

[email protected]

*My workings considers the two tax years come in the company's year end 30 June 2011.But Colleague of mine who is an accountant advises me that the above calculations are not correct. According to him, the calculations are as follows,

10,000 miles @40P

10,000 miles @ 25P

Please advise me that which calculations are correct and fair.

Thank you

Replies

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The limits ...

are referenced to the tax year and not the company year, so in theory your workings are 'more' correct. However, what happened in the period 01.04.10 - 30.06.10 (?) and you appear to have pro-rated the mileage whereas the claim need to reference actual journeys made with adequate records.

Thanks (1)

Just pay the upper rate

I agree with Steve that you need to apportion the mileage between tax years to determine whether 40p or 45p applies and (for tax purposes) the 10,000 limit resets to 0 on 6 April.

However, for NIC purposes, no NIC is charged where no more than 40p/45p is paid, regardless of the mileage level.  Best practice, therefore, is to pay 40p/45p per mile and declare the "profit" element on the mileage over 10,000 miles on the P11D.  It's as good a means of extracting profit from the company as any other.

Thanks (1)

Steve's right

Business mileage rates are applied on mileage done in the tax year not the financial year.

A mileage log should be completed to support a claim.

Fuel receipts should be available to support the amounts being claimed.

 

Thanks (1)