Which car expenses can I claim through my Limited Company?

11.03.2022
Dominic Smith
News
Dom Smith, Lovewell Blake Accountant

Knowing whether you should be putting mileage claims or other motor expenses through your business can sometimes be a tricky subject. You’ll want to understand the basics before you get too far ‘down the road’ with your record keeping.

Dom Smith, Lovewell Blake Accountant

If you have your own Limited Company, the crucial question is this: Does the business own the car, or do you own it personally? If the car is leased or financed in some way then this should be quite clear, being that the agreement will either be in the company name or a personal name. If not, and you’re not 100% certain, you’ll need to know whether the vehicle in question is included on your company balance sheet. You should check with your accountant if you are not sure.

If the company owns the vehicle, then the company can of course claim all expenses that relate to that vehicle: Fuel, repairs, road tax, insurance, and anything else. Be careful though, if there is any personal use of the vehicle then it will likely be deemed as a benefit in kind, and therefore is likely to trigger extra tax for both the company, and the person receiving the benefit of the company car. What we mean here is that using a company vehicle for your own personal travel is no different to an employee being given use of a company car – there are potential tax consequences, as a company car is ultimately a benefit that can be assigned some monetary value, and therefore taxed.

The tax consequences are usually less severe for electrical vehicles or for commercial vehicles such as Vans, and more severe for normal petrol or diesel cars.

On the other hand, if you personally own the vehicle but use it for business purposes, mileage claims apply instead. You must keep a log of all business miles (outside of your usual journey to work, if applicable) and this mileage can be paid at up to 45p per mile (Plus an extra 5p for any journeys with a passenger). This rate is designed to cover both fuel, and wear and tear on your vehicle.

As a limited company owner there are two benefits to this:

1)     The mileage claim is a business expense for the company, which will reduce corporation tax

2)     From a personal tax point of view, the money paid to the director or employee is tax free.

Therefore, if you own a Limited company and use your personal vehicle for business trips, it is highly advisable to keep a mileage log.

Could you benefit from seeking further advice?

 

 

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