Car advertising

Car advertising

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Hi all - Does anyone know whether you can offset any vehicle costs against income derived from advertising on your car (I'm thinking of car wrap advertising in particular which a client of mine gets paid £150 per month for!). The advertising company stipulate that a certain number of miles must be driven and the car of a certain quality to qualify.

Thanks.

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By Steve Kesby
23rd Nov 2011 11:20

Depends

I'm not sure there is enough "activity" for this to constitute a trade in its own right, which would allow you to claim expenses.

If, however, the client is already trading in some other capacity and uses the car for that trade, you could treat it as a contribution towards the running costs of the car.

Thanks (1)
By The Doctor
23rd Nov 2011 19:03

Thanks Steve - in probably being dim but could you elaborate on your contribution point - how would that work? Are you thinking of a contribution towards a company car? Do you think in a unincorporated you could argue a higher business use %?

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By Steve Kesby
24th Nov 2011 10:42

My thoughts...

... were, in fact, more geared towards a sole-trader.

In the instance where the individual owns the car personally (including where they use the car in an employment, perhaps even by their own company), I can't see any basis for taking relief for expenses as the car wrap income seems to me to be assessable under what used to be Case VI ("Other Income").

Where the car is owned by an incorporated or unincorporated business (including a sole-trader in such capacity), there seem to be two potential treatments: either to treat it as income, or to treat it as contribution towards the running expenses of the car (car tax, insurance, servicing, consumables, financing and fuel).  The latter seems to me to reflect the substance of the arrangement; at £1,800pa it's not really an income source in its own right, but a means to mitigate costs.

Where the car is owned by a corporate and provided to an employee/director, this treatment doesn't impact the car benefit calculation.

For an unincorporated business, if the income is treated as income and there is a private use adjustment for the expenses, the whole of the income is taxable and there is an argument that the private use percentage should be reduced to reflect the raising of additional business income, but it seems to me to be a potentially tenuous and troublesome argument.

Conversely, treating the income as a contribution towards expenses has the effect of rendering a proportion (the private use proportion) of the income non-taxable.  That seems to me to be the better position for the client, and a tenable one based on the substance of the arrangement.

For VAT purposes, I do think that this income would be considered consideration for a supply and so VAT should be accounted for on it.  For an FRS trader the flate-rate percentage would obviously apply, otherwise the VAT is 1/6th of the amount received.

HTH

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