Imagine a courier who owns a car and a van. He never uses the van for any personal trip, except for commuting to the same warehouse every morning.
From his home to the warehouse there are 10 miles - 20 minutes.
Once in the warehouse, he picks up the parcels. Delivers on average 140 parcels every day, during 9 hours, driving 40 miles on route.
Then he goes back to warehouse to leave any non-delivered parcel, and then home again, 10 miles, 20 minutes.
I am trying to understand which % of personal use of business vehicle would be more tax efficient but reasonable at the same time for HMRC.
In terms of miles, his personal use is (10+10)/ (10+10+40) = 25%
In terms of time, his personal use is 0.3 hours + 0.3 hours / 9.6 hours = 6.3%
Two questions please:
Q1) All the guidance I find say the personal use is calculated based on miles. 25% looks very unfair - most of the petrol is spent starting over and over the engine in different deliveries and short trips. How do you calculate this?
Q2) The insurance of the VAN is £7000 per year due to the courier risk. Can this be claimed 100% as business expense? The courier would not have this insurance if he was not in this business.
Thank you.
Replies (74)
Please login or register to join the discussion.
It would be much better if they had to concern themselves with a minimum wage.
I understand drivers get about 30p per parcel and spend 9 hours or more delivering about 140 parcels (per OP). Therefore get about £56 per day or £6 per hour before expenses. If you take out the cost of the vehicle, someone like the OP client is probably clearing only half that, which is absolutely ridiculous (to say nothing of the extra danger on our roads!).
Yep. The explosion in delivery services since Covid is pithily described as a "Vandemic".
I'd just take an honest stab at it . . . . . I'd only worry about justification if the proverbial were to hit the fan. There's so many ways of looking at it and so many possible interpretations that winging it (in a reasonable way based on the actuality of personal use as compared to business use) is as good a way as any.
At the risk of sounding stupid, is it even relevant to consider 'commuting' in the case? If the courier is self-employed and can prove he never uses the van for personal journeys, surely the whole cost is a legitimate business expense?
At the risk of sounding stupid, is it even relevant to consider 'commuting' in the case? If the courier is self-employed and can prove he never uses the van for personal journeys, surely the whole cost is a legitimate business expense?
It's tough to argue that the warehouse isn't a temporary workplace - though we don't have enough facts to say definitely.
We were told "He never uses the van for any personal trip, except for commuting to the same warehouse every morning... From his home to the warehouse there are 10 miles... Once in the warehouse, he picks up the parcels. Delivers on average 140 parcels every day, during 9 hours, driving 40 miles on route. Then he goes back to warehouse to leave any non-delivered parcel, and then home again, 10 miles..." What more do you want to know?
FWIW, I'd say it was quite certain that the drives from home to work and from work home were for the purpose of getting to and from home. HMRC alleges that being at home (and therefore the cost of getting to and from home) has a private (i.e. non-business) purpose. HMRC acknowledges it hasn't always been right (see e.g. the comments re Horton in BIM37620), but I'd find it hard to defend the case of the hypothetical courier in the OP.
Well, I was trying to leave the door open for further revelations. Such as the OP has never dealt with the same warehouse more than once.
A different hypothetical courier might have different background facts, and therefore a different tax outcome, indeed.
Off topic a bit, but I would like to see a court case where someone argued that, while the reason for the morning journey to work might be that they had been at home, the purpose of the journey was to get to the place of business. Maybe there has been such a case. (Clearly getting home is a no-hoper. But are we where we are because people have always argued for both (and therefore lost), never for the outward journey in isolation? Or has it been tried and failed? [My case law memory really is playing up in this thread!] I think with so much history agin it, there'd be little hope of success, but I'm not quite clear on why home to work isn't business. The purpose of a journey [in my head] is where you are going to, not where you have come from.)
Because "business" only starts on arrival at the place of business (the warehouse in this case, apparently)?
The gig economy is throwing up variants on the usual scenarios which may not have been tested at Tribunals or made there way into case law.
If a courier argued that because their customer does not permit or provide the usual depot facilities including provision for the van to be left there overnight, and they are responsibilitiy for maintenance and presentation (of their own vehicle), and they run the business from his home, then taking the van there for its daily checks would appear to have a clear business purpose, one of health and safety. If you look at the journeys in reverse, they become from place of business to "depot", and back the next morning.
The gig economy is throwing up variants on the usual scenarios which may not have been tested at Tribunals or made there way into case law.
The gig economy is not a billion times better.
Because "business" only starts on arrival at the place of business (the warehouse in this case, apparently)?
But that's not the test. (At least, not the statutory one. As I understand it. Whether case law has made it as you say... maybe.)
If a courier argued that because their customer does not permit or provide the usual depot facilities including provision for the van to be left there overnight, and they are responsibilitiy for maintenance and presentation (of their own vehicle), and they run the business from his home, then taking the van there for its daily checks would appear to have a clear business purpose, one of health and safety. If you look at the journeys in reverse, they become from place of business to "depot", and back the next morning.
I like your approach. But finding a business purpose to go home ("that's where I keep my screwdriver, m'lud") does not remove the non-business one - so fundamentally there's duality of purpose for that journey. (The one home, anyway.) Plus I'm pretty sure arguments of that type have lost in court.
But I ought to do my own research/case law refresh. I clearly need it. I confess to laziness in thinking out loud in here. I had abandoned the thread, I forget what brought me back to it.
Well some of the subjects are, dare I say, rather trivial. If AWeb was following its original purpose it should be about sections and cases, and while the law hasn't "moved on" in that sense, the real world has. Its so tempting to say to these questioners, you know what, no one's going to die as a result of this, no real harm done if they guy has to take his van offsite because he's self employed, disregarding the fact that he is really a disguised employee, so bleeding what?
You're forced to do all those things? Sounds rather like you're an employee. (That's not aimed at you; IMO big employers are shirking their employer duties and getting away with it. Though some of the biggest are starting to be brought to book - I think someone's already mentioned Uber, for instance. )
Also sounds like you think you are working 24 hours a day.
(whisper this) I have heard of accountants who advise their clients to put something down for personal use because it is less likely to trigger an HMRC enquiry than if they claim 100% business.
(whisper this) I have heard of accountants who advise their clients to put something down for personal use because it is less likely to trigger an HMRC enquiry than if they claim 100% business.
Where's that entered if you're on three line accounts ?
Hi Liono, I added another comment below too. Once we work for a client, we have to go to the same warehouse every morning to pick up the parcels. If we had let's say 2 clients per year, so we have had to go to 1 warehouse for 6 months every morning and to another warehouse for another 6 months when working for another client, would you consider that all the trips have been done to temporary locations therefore everything can be claimed as business expense?
I'd say that was a lot of ifs.
Go read the texts with regulations on private use charge on vans acquired for business purposes.
Are you an accountant practitioner?
/
This chap is self employed so there is no "private use charge" as such, the question is whether he should restricts his claim for releif to reflect his use of the van to and from the depot.
HMRC general guidance (that might actually be of help to the OP outside of the immediate question):
https://www.gov.uk/government/publications/hmrc-private-and-personal-exp...
Your 'depot' argument seems to have been dispatched by Jackman v Powell (2004).
My home-to-business argument has fared equally badly - partly in that same case, but at first blush Sargent v Barnes (1978) stacks up against me in a really heavy-handed way [I think I'll read this case more thoroughly, as there's something here I'm not twigging at all].
Were I (advising) the OP, I think I'd take the idea behind the time-basis, I'd note (as I noted above) that a mileage apportionment seems to be getting at (periods of) use and ignoring (periods of) non-use, I'd use that to support the idea that, if he could find a more 'realistic' measure of those periods than the mileage provides, then we could use that. It's not going to be 9/9.6. (Delivery drivers in urban areas spend as much time walking as driving - hence the low annual mileage.) Maybe it's 4/4.6 or similar - which I'd round up to 10%, because some wear and tear (eg tyres) really is best measured by mileage.
And I'll pass the hot potato on at that point and sit down. See you on another thread (I'll have revised my case law by then... you'll be pleased to know :-))