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Claiming Travel Expenses For Sole Traders and Partnerships


Sole traders can claim travel expenses when they use their own car to travel on business. They can reduce the amount of tax paid for the business.


Car Owner


A business that is run as a sole trader or partnership in a non-limited-liability has no such thing as a company car.


The concern with this is whether the car is owned or the owner has hired from a hire firm or a car club.


Car Use


The car can be used for business as well as personal purposes. The owner might use it to travel mainly to visit potential clients or even purchase grocery for the family.


HMRC will not accept that a car is exclusively for business use only. If the ca has a logo on its side, then HMRC might reconsider.


HMRC’s Mileage Method


Sole traders can do this mileage method. Sole traders may use the HMRC’s AMAP or Approved Mileage Allowance Payment rate for the type of vehicle the company is using. This vehicle might be a van, a motorbike, or car. Sole traders cannot claim more than that. During the purchase of the car, the annual turnover of the business was under the VAT registration threshold during that period. Currently, the VAT registration is £83,000.


It is not an issue whether the business is registered or not registered for VAT. HMRC utilizes this threshold for easy referencing. The mileage method cannot be used if the annual sales of the business are over the VAT registration threshold when the vehicle was bought.


There are no other expenses to be claimed when running this car. Sole traders cannot claim for the costs of repairs, servicing, MOT or wear and tear, because all of these are covered by the AMAP rate of HMRC. On the other hand, the business part of interest on a loan in purchasing the vehicle can be claimed.


The moment a sole trader has decided to use the mileage method, this can be utilized until this car is sold and another one is bought. It is not legal to shift from the mileage method to the full-cost method, or vice-versa, unless the company has changed vehicles. It is important to note that when a new car is purchased, the annual turnover of the business must be under the VAT registration threshold during the current period.


Full-cost Method


The full-cost method involves obtaining the sum of all the expenses made on the car during the year. These include petrol, MOT, repairs, and servicing. The business proportion is then worked out which is dependent on how much the car is utilized for business journeys and how much is for private journeys.


If you any more questions regarding claiming expenses on travel for sole traders and partnerships, you can ask our experts.


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