Hello all
Need some input, please.
Client is a self employed acting coach tutoring kids. He rents two chuch halls and pays monthly. He takes out a loan for a car to carry his props from home to the halls daily. He goes from one hall to the other daily and sometimes visits schools to give lessons. He does all admin work at home approx 3 hours daily. Trying to work out if the whole interest payment on the loan for the car can be deducted as bought just for the carriage of work tools and car isn't used for private purposes... well, apart from the commuting between home and halls (permanent workplace). The fact is, if heavy tools aren't being moved, the car wouldn't be needed. Client has a private car. How would you approach this in client's best interest?
Replies (19)
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Remember that the basic law is that a cost is not tax-deductible unless the whole of it is incurred exclusively for business purposes. Where you have a cost that is not exclusively for business purposes, you can still get a tax deduction if you can identify part of the cost that is exclusively for the business. That will be the case with the interest cost (but have you looked into whether your client can use simplified expenses and, if so, whether this gives a better result?)
To identify a business-only part of a cost such as loan interest, for a car, an acceptable approach is to work out what proportion of the mileage can be treated as business travel. HMRC's introductory guide (https://www.gov.uk/expenses-if-youre-self-employed/travel, more detailed guidance is available in the manual) simply says: "You cannot claim for:
- non-business driving or travel costs
- fines
- travel between home and work"
Applying that 'rule', you might for example find that the proportion was given by the fraction (total journeys between halls) over (total journeys). That's unlikely to be 100% accurate but it's the best I can do from the info provided - you will need to consider the actual position.
@OP: BTW, as I doubt you follow Aweb particularly closely, let me add some context...
The comment to which this is a reply is not an answer to your question. Well it is, but it gives the second-worst possible outcome.
What I try to do (what I have always tried to do, though this is seldom appreciated... and indeed has been called a toxic approach) is to get people to think for themselves and look things up for themselves.
I am being more explicit this year in providing references to things to think about (I've called them "issues" in other threads) and not providing answers, where these depend on facts which can only be guessed at from the question.
I would expect others (if you don't) to pick up on a couple of the things I've said. Maybe they'll see that as "correcting" me. I'll see it as exploring the issues I've raised. There may of course be other issues... though maybe less so in your scenario, TBH.
Hope that makes a bit of sense. If not... ignore it. And you'll be pleased to hear that others take a different approach and might seek to answer your question based on assumptions they are unlikely to list. To my mind, that makes such answers unreliable. And you're right, I'm not really addressing these comments to you anymore. So, seriously, ignore me :-) But do look at my first post. And do look up the guidance.
Here's some more. https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-
See also working from home on the next page.
And have a look in the BIM - it's really much better.
Of course, the same rules apply to vans and
HMRC tend not to argue vans
does not exonerate an accountant from applying the rules correctly.
I'm sure that wasn't what Paul meant. (So... I'm not sure what he did mean.)
Not being sure, I've Binged it (makes a change from Google) and I find that it has two meanings:
1) absolve from blame
2) release someone from an obligation.
So I was right when I wrote it, as I then had (2) in my head. I think afterwards I read it (back) as (1) and hence confused myself... should I have said "does not exonerate an accountant who applied the rules incorrectly"?
Sigh.
Then you also confused me! I thought you meant "does not excuse the accountant for not applying the rules correctly", but it seems you had in mind "does not relieve the accountant of the obligation to apply the rules correctly".
Thanks for the (unintended) demonstration that different words do have different meanings, even if the subtleties are just that - subtle - and that we should choose with care.
Please do not get me started on "train station".
It was the same word having two - apparently opposite (vis-à-vis the number of negatives that they invoke) - meanings that threw me off balance. It seems I hear (and therefore write... I 'hear' what I'm thinking much more than I 'see' it) "exonerate" in the "relieve" sense, but see (read) it in the "excuse" sense. Now I know this is the wrong word, but... it's like a form of (reverse?) synaesthesia.
But, yes, thank you for helping me clarify what I meant. (I find I could do with an interpreter quite often! Talking of which... I still don't know what Paul meant, assuming he didn't mean that van drivers should break the law.)
Interpretation? You remind me of a time long ago when I was reviewing the translation of the audited financial statements of an international financial institution prior to release of the signed opinion. Being international, it was required to publish the accounts in several languages. One of the Notes to the Accounts (interest rate exposure, maybe) was grammatically ambiguous in English, but the translation could not reflect that ambiguity – it was one way or the other. No option, had to call up the audit manager to ask what the note was trying to say, to find a different way of phrasing it to remove the ambiguity. He had no idea! I have to assume the other translations had successfully rendered the ambiguity, but they were all recalled from the various offices around Europe for amendment. I don't recall now whose head was mounted on the railings.
Not being sure, I've Binged it (makes a change from Google) and I find that it has two meanings:
Sigh.
Bing, owned by Microsoft, and therefore not to be trusted.
Seconded.
And the question comes straight from BIM.... sooo much better that that introductory guidance nonsense that the initial respondent linked to. (BIM45650, BIM45675 etc.)
Odd
No-one has asked size and brand of cars
No theoretical difference
but belief difference
Is the 100% work car bigger better and seriously more expensive than the domestic car that partner uses
I'm missing the conundrum.
Would the journey to work be a business journey if he didn't have tools in the car? If yes, then the tools don't change that. If no, then the tools don't change that.
Don't overlook Wilson's point.