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Sole Trader Cleaning Business Car Use

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Hi

Can I just double check..sole trader cleaning business. Family car is in husbands name but the wife uses the car for her cleaning business. Am I correct in thinking that capital allowances and vehicle maintenance costs can not be claimed as the car is not in her name? 

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By Paul Crowley
24th Jun 2021 20:41

Try claiming 45p per mile for up to 10,000 miles per annum

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Replying to Paul Crowley:
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By Hugo Fair
24th Jun 2021 22:30

I follow the logic, but are you sure?

All the guidance refers to "your car" (to distinguish it from rates applicable to a car provided by your employer), but I can find no explicit reference to the use of 'any-car-not-provided-by-the-employer' (such as a car owned by employee's spouse).

[The idea is the 'profit' (over and above the cost of fuel/mile) is compensation for the capital and running costs of the vehicle amortised into a mileage component].

Happy to be corrected if I'm posting after bed-time - and showing it!

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Replying to Hugo Fair:
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By Lmb17
24th Jun 2021 23:03

I completed an online questionnaire on HMRC which lead to a result that claiming actual vehicle running costs and capital allowances would work out far better than the mileage route but I don't know how it applies if the car isn't in her name..

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Replying to Lmb17:
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By David Ex
24th Jun 2021 23:22

Lmb17 wrote:

I completed an online questionnaire on HMRC which lead to a result that claiming actual vehicle running costs and capital allowances would work out far better than the mileage route but I don't know how it applies if the car isn't in her name..

What proportion of the total mileage was for the wife’s business?

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Replying to Lmb17:
By Duggimon
25th Jun 2021 09:06

Lmb17 wrote:

I completed an online questionnaire on HMRC which lead to a result that claiming actual vehicle running costs and capital allowances would work out far better than the mileage route but I don't know how it applies if the car isn't in her name..

Did this questionnaire include the private use deduction on the capital allowances, insurance, tax, and repairs?

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Replying to Duggimon:
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By Lmb17
25th Jun 2021 11:43

Yes it did. It asked for a business percentage use of the car

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Replying to Hugo Fair:
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By David Ex
24th Jun 2021 23:17

Hugo Fair wrote:

I follow the logic, but are you sure?

All the guidance refers to "your car" (to distinguish it from rates applicable to a car provided by your employer), but I can find no explicit reference to the use of 'any-car-not-provided-by-the-employer' (such as a car owned by employee's spouse).

[The idea is the 'profit' (over and above the cost of fuel/mile) is compensation for the capital and running costs of the vehicle amortised into a mileage component].

Happy to be corrected if I'm posting after bed-time - and showing it!

I had a search and the basis for the ppm deduction is apparently now enshrined in legislation:

https://www.legislation.gov.uk/ukpga/2013/29/schedule/5?view=plain

As I read it, the ppm deduction is alternative to a deduction for actual expenditure incurred. If that’s the case, you may well be right - if the trader doesn’t incur any expenditure. However, there seems to be no requirement for the actual expenditure to be any particular amount. Maybe paying the husband £5 a year to use the car would be sufficient actual expenditure to allow the use of the alternative ppm.

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By possep
25th Jun 2021 07:56

The claim is valid for an employee under the mileage rates so it would follow that a self employed individual could claim. If not hire it for £1 a year.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31255

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Replying to possep:
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By Tax Dragon
25th Jun 2021 09:20

possep wrote:

The claim is valid for an employee under the mileage rates so it would follow that a self employed individual could claim.

I disagree. ITEPA for employees. ITTOIA for the self-employed. No reliance for the one may be placed on the treatment of the other (though there may be cross-fertilisation of interpretation of words in common, such as "wholly" and "exclusively").

That said, I'm with the consensus view here. (And Duggi and Paul explain the p/u issue very nicely.)

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By Paul Crowley
25th Jun 2021 08:59

A family car is registered in the name of the main user. DVLA do not like the idea of joint main users
The comment 'in the name of husband ' has no meaning
If the car is being used, a claim is correct for miles.
Trying to claim full expenses and private use of a car when the trader is clearly not the main user I would consider to be probably not the best solution.
How many miles is a cleaning business likely to cover?
How many miles on the odometer in a year?

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By jonharris999
25th Jun 2021 10:05

Also just to make the point that even if the capital allowance method could be made to stick here (and I tend to agree with Paul that it might be unwise to try), client is stuck with the method chosen for all future years of the life of that vehicle in the business, no chopping-and-changing year on year. Therefore where a comparison is being made, one wants to calculate or imagine an average year, rather than 20/21 - which was probably not average for the vast majority of businesses.

It is to avoid just such sleepless nights that the mileage method was conceived, and I think it is a thing of beauty in the majority of cases.

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Replying to jonharris999:
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By Paul Crowley
25th Jun 2021 10:46

Nearly all clients self-employed with cars that I act for are better off with 45p per mile unless the private use bit of the calculation is a bit dubious, or they buy new every three years.
45p is generous now that cars are so fuel efficient.

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Replying to Paul Crowley:
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By Cazzie B
25th Jun 2021 12:07

Still got the XFR, so not generous for me
Would go electric but cannot afford a Tesla S
I like fast !

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By Lmb17
25th Jun 2021 14:34

I spoke to HMRC technical support who consulted an inspector who confirmed no, vehicle expenses can't be claimed if the car is in her husbands name. She could hire the car from her husband for use however hiring for a very small amount would be frowned upon as it is disproportionate and obviously the hire charge would then be income to her husband to be declared for tax purposes so mileage rates it is. The amount of fuel expenses claimed pretty much balances out with the mileage rate anyway if converted...it was just the vehicle maintenance costs that would have been beneficial but good to know for future...

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Replying to Lmb17:
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By Tax Dragon
25th Jun 2021 15:41

Lmb17 wrote:

The amount of fuel expenses claimed pretty much balances out with the mileage rate anyway.

Perhaps investing in a car that did better than 12mpg would be a good move. Business-wise too. When the cleaner turns up in a Bugatti, you wonder how interested they are in their work.

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Replying to Lmb17:
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By David Ex
25th Jun 2021 16:25

Lmb17 wrote:

however hiring for a very small amount would be frowned upon as it is disproportionate and obviously the hire charge would then be income to her husband to be declared for tax purposes so mileage rates it is.

HMRC can frown all they like but I can’t see that it’s not ‘allowed’. Yes, there would be a potential tax issue but presumably the net profit to the husband would be small enough to be pretty irrelevant to the decision.

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Replying to David Ex:
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By Tax Dragon
25th Jun 2021 16:46

I didn't understand the words you quote. That's why I didn't respond to that bit of the comment.

The suggestion earlier in this thread was to create some allowable cost as mentioned in s94D(1)(a). I don't see that car hire is needed here - that might have non-tax consequences eg re insurance. I dunno, IANAIB. But paying for the fuel for your journeys would seem to do it, without other concerns arising.

Anyway, the words "so mileage rates it is" seem like a complete non-sequitur from the words that precede them.

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Replying to Lmb17:
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By Paul Crowley
25th Jun 2021 16:36

Accountants should not take tax advice from HMRC
They do not write the legislation, and regularly fail to understand it
HMRC lose an awful lot of tribunals
If HMRC understood tax they would win ALL THE TIME

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