claiming mileage twice?

[UK2BKK]

Hi

I have a new contract where my client pays for some of my expenses, mileage at 25p per mile, hotel up to 45gbp and toll fees, thats it. They also
pay me an hourly rate. So all these costs are reimbursed.

I will be driving up to 60,000 miles per year in my own car.

I currently do this contract via the agency (Client) as paye but I can change to self employed.

If I go self employed, client reimburses my expenses and pays my hourly rate but can I then claim my mileage from the Inland Revenue at 40p per mile?

Incidentally my hourly rate is not very high and the gross mileage can be higher than the total gross hourly pay.

Thanks in advance, I don't want to cheat just do whats allowed.

[XLMonkey]

You can claim the Inland Revenue mileage rate of 40p/mile for the first 10,000 miles only, the rest are at 25p (provided that you are not commuting to and from a settled place of work). You do this either through PAYE, or by registering self-employed. However, I'm guessing that your agency will be reluctant to operate a self-employed option.

If you are on PAYE, then either
- your agency reimburse you at the 40p rate, and deduct the difference (between 25p and 40p) from the hourly rate they pay you; or more likely
- you reclaim the difference through your self-assessment form at the end of the tax year. This is the option your agency will probably prefer, but it does mean that you don't get the money back for a year or so (after you've completed your tax return)

[RichardCranium]

Don't mix your LtdCo's money and your money.

When working as a LtdCo (you won't be self-employed, it's not permitted) you personally claim every mile and every travel fare you possibly can from your LtdCo as expenses. This is a way of getting money out of your LtdCo without paying tax on it.

Meanwhile, your LtdCo should be trying to reclaim as much mileage / travel expenses as it possibly can from the client / agency. You don't get that money directly, it belongs to your LtdCo. (It then goes into the big pot entitled Profit and you can draw that having paid tax on it.)

That is a simpler way of visualising it that trying to visualise claiming expenses 'through'; your LtdCo. This is especially true when a client will only pay some travel expenses or a different rate than that which HMRC permits.

[ASB]

Irrespective of your employment scale you rcan claim on you SA return mileage at IR rates, from this the actual mileage paid is deducted. The IR will then allow the difference to be claimed agains tax - so you get tax relief of 40/25 irrespective of what is paid (if it's more you get taxed on the difference).

[RichardCranium]

Irrespective of your employment scale you rcan claim on you SA return mileage at IR rates, from this the actual mileage paid is deducted. The IR will then allow the difference to be claimed agains tax - so you get tax relief of 40/25 irrespective of what is paid (if it's more you get taxed on the difference).

Now I know why I have to use an accountant. I barely understand that.

[Maslins]

Simple example (assume for the purposes of this you do less than 10k miles/year):

Client pays you £100 + 40p/mile for 100 miles = £140. You'll only pay tax on £100 as the mileage is exactly equal to what HMRC accept.

Client pays you £100 + 25p/mile for 100 miles = £125. You can still claim 40p/mile (£40 mileage expense) so your net profit on which you pay tax is £85.

Client pays you £100 + 50p/mile for 100 miles = £150. You can only claim 40p/mile (£40 mileage expense) so your net profit on which you pay tax is £110.

[ASB]

Now I know why I have to use an accountant. I barely understand that.

To expand on what Maslins said (and I'm sure he'll correct me if the details is wrong).

Your Co is paid a flat £1 per mile and you do 20,000 miles.

At this point your Co has simply got 20,000 of extra income and your co pays CT on that.

But: you **personally** could still claim £1 per mile from the company. This reduce the companys profit element to NIL.

The 'profit' element is 20,000 - 4000 (40p for 10k miles) - 2500 (25p for 10k miles). Thus your tax return will (should) show

- Expenses received = 20,000
- Expenses claimed = 6,500

This will lead to you paying tax (rightly) on the excess of 13,500.

Alternatively you could claim, say NIL. In this case the company is being taxed on a profit of 20,000 and your taxable income will be reduced by 6,500 (the revenue accepted rates)

- Expenses received = NIL
- Expenses claimed = 6,500

Where it gets complicated is whether as an individual you are better claiming from the company or not. There are cases where it can be cost effective to claim NIL from the company and get relief at the inland revenue rates through you SA return.

The fundamental points are:-

- Expenses received are simply income.
- It may well be that some of these can be offset against tax
- If you incur a chargeable expense it is claimable from the company, irrespective of whether the company has been reimbursed.
- You can claim exactly what you want from the company (though this will have consequences both on CT and personal tax).

I'm sure that is as clear as a very opaque thing.

[Sally BFCA]

Expenses Received should be treated as a 'cost of sale' in the accounts as it is a cost that you have borne in the performance of your duty

[ASB]

Expenses Received should be treated as a 'cost of sale' in the accounts as it is a cost that you have borne in the performance of your duty

[Spacecadet]

claiming mileage twice?

If I go self employed, client reimburses my expenses and pays my hourly rate but can I then claim my mileage from the Inland Revenue at 40p per mile?

You don't claim anything from HMRC, the mileage is written off at the rate of 40p per mile (for the first 10,000 miles per tax year) as a business expense meaning you don't pay any tax on that amount.