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Is Previous Accountant's Mileage Claim Appropriate

Vat Registered Trading Partnership using Business Van plus Private Cars - Mileage Allowance Utilised

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Inherited new vat registered trading partnership. The two partners use their large van 100% for business purposes and so all van expenses are income tax and VAT allowable. I have no problem with that.

However, when they go out to price up jobs they jump into their tiny car(s) (they are cheaper to run than the van) and create a log of the business mileage from their home office to the prospective new job. So, let's say the business mileage for their tiny car(s) totals 5,000 miles, at 45p per mile that equates to an income tax allowance of £2,250. The other running costs (including fuel) for the tiny cars are NOT being passed through the business.

What the previous accountant then did was to debit partnership motor expenses £2,250 and credit drawings £2,250.

Does anyone envisage any income tax/accounting problems with this. It is the VAT registration which slightly worries me. But it does seem like such an easy way to resolve the "incidental" business use of the tiny cars. It is probably the most economical way of dealing with the prospective new customers.

If there is a problem, then what is the correct (simple) way to allow for the business use of the tiny cars. I suspect actual business use % of the tiny cars but then that will add a monstrous layer of additional record keeping.



Replies (2)

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By lionofludesch
05th Mar 2019 12:01

Seems OK to me.

Though 100 miles a week seems a lot for pricing up jobs. Hope their records back it up.

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By frankfx
05th Mar 2019 12:18

There is some vat inside the 45p that can be reclaimed.
Every penny ''may '' help.

The formal mileage log , supported by fuel receipts , is required to be VAT tax compliant.

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