I signed up and I think my records are now difficult to understand and impossible to check compared to the old system in place .
You're a professional accountant, but you can't keep your own records in a methodical way on a spreadsheet?
Yes, that's the point of the query. For a company car or a privately owned vehicle there is no need to ask all those questions because there is a convenient recognised calculation of a rate to start with, which glosses over all (or most of) those variable factors.
But throw in a simple car allowance which exactly covers the capital cost (in this case) and there is no convenient equivalent.
So 2 guys come along for a couple of £40k jobs. First guy has his own car already and the company will pay him £40k + 45p/mile to cover his business use of that car. Second guy has no car. Should he get £40k + £2k car allowance + 45p/mile? I don't think so. Shouldn't he get £40 + £2k car allowance + a lower mileage rate?
I think that's different. The other people who use their own cars that they have bought themselves would be on £40k not £42k.
Why pay this guy £42k when he could be paid £40k and an all-inclusive mileage rate instead?
It's not a tax question - I know what the tax treatment is.
In this situation the employer is definitely paying the equivalent of the capital cost of the vehicle. The company had agreed a remuneration figure with the employee and then added a grossed up figure on top of that to reimburse the employee the net monthly cost of renting the vehicle.
OK, so the answer is:
The position is not straightforward in that there is a recognised mileage rate for a company car, where only fuel is being claimed, and there is a recognised mileage rate for an employee's own car where the employer is reimbursing fuel, maintenance and capital cost, but there is no recognised mileage rate for where an employer wants to reimburse fuel and maintenance but no capital cost.
In this situation it is up for negotiation between the employer and employee what rate to use. Presumably higher than the 21p/mile for fuel only, and lower than the 45p/25p rate above which the employee would incur a tax liability.
I would think it would be quite standard for a client to ask their accountant to advise a reasonable rate for them to use in this situation. The problem is there isn't an easily accessible rate to respond with.
I think the question is - does this income drop out of the rolling 12 months on 27/9/20 based on invoice date, or 30/10/20 based on receipt date.
I assume that on for cash accounting it is the latter.
I understand that the employee will not get taxed if the rate is under the MAP rate, and that he can even claim tax relief if it is under MAP, but this isn't a question about the tax treatment. The employer has come to me asking to give them a figure and I'd like to be able to justify it somehow, rather than just pulling one off the top of my head.
The employer won't want to pay MAP as it is already paying the capital cost, and the employee won't settle for AFR as it doesn't include maintenance costs. So, just somewhere in the middle?
Whatever you do, avoid Aquaint like the plague. They write accounting software but have absolutely no accounting expertise.