Reasonable personal use of business van

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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)

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Replying to Arthur Putey:
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By whitevanman
01st Mar 2021 13:12

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!).

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Replying to whitevanman:
A Putey FACA
By Arthur Putey
01st Mar 2021 16:27

Yep. The explosion in delivery services since Covid is pithily described as a "Vandemic".

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Replying to whitevanman:
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By Soletrader1990
02nd Mar 2021 23:48

We get paid more, approx £125 per day. But we do pay approx £60 on petrol plus £240 on renting an insured van with a £2,500 excess. Any scratch is at least £100 damage. So not as bad as you thought, but not as good as I wished.

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By lh3f9764bg1g
01st Mar 2021 10:30

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.

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John Hextall
By John Hextall
01st Mar 2021 12:10

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?

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Replying to John Hextall:
RLI
By lionofludesch
01st Mar 2021 13:22

john hextall wrote:

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.

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Replying to lionofludesch:
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By Tax Dragon
01st Mar 2021 13:55

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.

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Replying to Tax Dragon:
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By lionofludesch
01st Mar 2021 14:38

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.

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Replying to lionofludesch:
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By Tax Dragon
01st Mar 2021 15:18

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.)

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Replying to Tax Dragon:
A Putey FACA
By Arthur Putey
01st Mar 2021 17:12

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.

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Replying to Arthur Putey:
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By lionofludesch
01st Mar 2021 17:35

Arthur Putey wrote:

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.

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Replying to Arthur Putey:
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By Tax Dragon
01st Mar 2021 17:55

Arthur Putey wrote:

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.)

Arthur Putey wrote:

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.

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Replying to Tax Dragon:
A Putey FACA
By Arthur Putey
01st Mar 2021 18:10

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?

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Replying to Arthur Putey:
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By Soletrader1990
03rd Mar 2021 00:00

Arthur Putey wrote:

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.

This is very interesting.

Fact 1: We are not allowed to leave the van in the warehouse. When we rent it, we have to leave it parked in front of our house and if the van gets damaged (they don't care if it was damaged while parked or while working) you have to pay for the damage.
Fact 2: We are forced to drive the van to the warehouse everyday. This seems to be personal use per HMRC....HOWEVER....is it personal use or really forced? We cannot choose an alternative way to go to work, for example by public transport, personal car, bicycle...we are forced to do it with a very specific van that very few people would buy for personal joy.

Based on fact 1 couldn't a courier claim that the van is 24 hours at business risk, and based on fact 2 that there is not personal use when you are forced to take this expensive van to the warehouse everyday instead of your bicycle?

It might be I am tired after working, but I am the OP and now I don't want to add back any personal use in my next tax return, which is an option I had not considered before.

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Replying to Soletrader1990:
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By Tax Dragon
03rd Mar 2021 06:47

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.

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Replying to Soletrader1990:
A Putey FACA
By Arthur Putey
03rd Mar 2021 09:03

(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.

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Replying to Arthur Putey:
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By lionofludesch
03rd Mar 2021 10:24

Arthur Putey wrote:

(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 ?

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Replying to lionofludesch:
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By Soletrader1990
03rd Mar 2021 00:10

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?

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Replying to Soletrader1990:
RLI
By lionofludesch
03rd Mar 2021 10:24

Soletrader1990 wrote:

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.

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By David Gordon FCCA
01st Mar 2021 13:00

Go read the texts with regulations on private use charge on vans acquired for business purposes.
Are you an accountant practitioner?
/

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Replying to David Gordon FCCA:
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By Soletrader1990
03rd Mar 2021 00:20

I am a courier. Where can I find the guidance on this?
I found this but it relates to companies, not sure if applicable to soletraders:
https://www.gov.uk/guidance/benefit-charge-on-company-vans-available-for...

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Replying to David Gordon FCCA:
A Putey FACA
By Arthur Putey
03rd Mar 2021 09:08

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.

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Replying to Arthur Putey:
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By Tax Dragon
03rd Mar 2021 10:23

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 :-))

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Replying to Tax Dragon:
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By Soletrader1990
04th Mar 2021 20:30

Thanks Dragon!!!

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