How Do We Run A Car Or Other Vehicle Through The Business

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One area that most new business owners need to know about is how to run a vehicle

The answer to this will mainly depend upon whether you are running the business as a sole trader or a limited company, as follows: (including, where applicable, their own car) through their business.

Sole Trader

As a sole trader, YOU are the business, and your car automatically becomes part of the business, for tax purposes. In this scenario, you are simply required to keep a record of your business mileage, which can then be compared against the vehicle’s total mileage for the year, to give a ‘business’ percentage. If, for the sake of argument, this works out as 60%, you can then claim 60% of the entire running costs of that vehicle, including fuel, tax, insurance, repairs etc.

Limited Company

This is a totally different scenario, as the limited company is a separate legal entity in its own right. This means that, if you simply pay for the car through the business, then the company is, effectively, providing you with a company car, which will be subject to tax like any other employee. The last thing any of us want is to be taxed for using our own vehicle.

The way around this is to use what are know as MAPs  (Mileage Allowance Payments – formerly the Fixed Profits Car Scheme) whereby we can claim a set mileage rate from the business, which we then use to finance the running of the vehicle. This way, the company indirectly pays the motoring costs, but there is no tax implication, and the vehicle remains your own property.

The AMAP rates are 45p per mile for the first 10,000 miles a year, and 25p per mile thereafter.

Further details can be found at; http://www.hmrc.gov.uk/payerti/exb/a-z/m/mileage-expenses.htm#x1

About Alan Young

MD and owner of the Woodhurst Group, including Praxis Accountancy Limited and Blue Sky Recreation Limited. Also Commercial Director of The Sky visor Group
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