Are my lease calculations correct ?

MehulLakhani · 2 Sep 2012 at 22:30

Hi All

Am looking to replace our ageing Yaris, and am wondering if I might be better off with a lease car. I am self employed, but also have a role as a director of a company. Here are my calculations - I am sure that I have gone wrong somewhere, but let me know what you think .

Car that wife likes - Golf Mk6 1.6 TDI - 2 year contract - £239.94 including VAT

Lets say £240 a month including VAT.

Company accountant advises me that HMRC are happy to write off 50% as business use.

£120 a month written off against my tax bill.

At 40% tax, roughly £48 saved per month because of the tax write off.

Therefore we are on £240 - 48 = £192 per month cost to me

I also work as a company director. I have to travel to about 3 meetings per week - which is approx 10 miles each way, so 10 x 2 x 3 = 60 miles per week - this is all related to my role, so I assume I can claim back 45p per mile.

60 miles per week, 240 per month.

240 x 0.45 = 108 pounds back per month

192- 108 = 84 pounds per month.

Net cost to me 84 pounds per month .

Is that correct ?

Thanks

Mehul

blueboy2001 · 2 Sep 2012 at 22:48

Mathematically it's correct, but the mileage claim as a company director could be made against any vehicle you have use of and not all of the 45p per mile is profit so I would say it is wrong to state the net cost to you as £84 per month.

You'll also have to insure and maintain it over and above those costs.

jellybeard999 · 2 Sep 2012 at 23:18

You do 60 business miles a week, but are going to claim that's 50% of your usage?

MehulLakhani · 2 Sep 2012 at 23:22

jellybeard999 said:
You do 60 business miles a week, but are going to claim that's 50% of your usage?

The 60 miles are for an entirely different role.

Would that be okay in term of HMRC rules ?

R

Mehul

blueboy2001 · 3 Sep 2012 at 00:39

I would say this is a matter of fact and degree.

One the one hand, your claiming tax allowances on a vehicle as self-employed. HMRC say you can either claim expenses or a fixed rate, not both.

However, you're only claiming 50% usage for your self employment.

As a Director you are treated as any other employee for tax purposes.

I've had jobs where I've been taxed PAYE whilst running sole-trader businesses and done the same thing as you are proposing and never been questioned - but I've never had a tax inspection!

I think the critical thing here will be for your claimed mileage not to exceed 50% of the total mileage - with some allowance for personal use as well. You're looking at claiming circa 2500 miles a year in this way, I think if you're doing over 10k a year you'll be OK.

If you were doing 10k and claiming 8k in expenses from somewhere else HMRC might have cause to tax you on it.

Incidentally - 50% is HMRC's starting point for mileage splits. If you can make a case for it, they will allow higher splits. 60/40 is easy to get, over and above this they'll probably want evidence but I know people who are allowed 80/20 on nice cars - generally once you've negotiated a split during a tax inspection they'll stick to it in future.

MehulLakhani · 3 Sep 2012 at 00:55

Another question. :confused:

If I am using the car as 50% business use, then can I also claim 50% of my insurance, servicing, tyres etc against my tax bill ?

R

Mehul