Car or Train to Temporary place of work?

[icemancomeths]

Hi Guys,

I'm new to contracting and have a quick question. I am about to start a 3 months contract (maybe extend) and will be driving 100 miles per day in my private car.

I have worked this out and it will cost about £300 per month. But I can claim around £600 per month.

The cost of the same journey by train will be £300 per month.

I have a limited company and I am the only employee.

Is it beneficial for me to claim mileage expenses or train expenses, if I claim the mileage expense wont this be taken from my potential dividends?

Cheers for any advise.

Regards

Iceman

[captainham]

If you claim mileage allowance, this is tax-free, i.e., reduces your CT liability plus does not count as part of your personal allowance.

Claiming the train fare instead also reduces your CT liability but doesn't give you anything 'extra' (I'm ignoring the wear/tear aspect on your car here of course).

At 100 miles per day x 45p per mile, this is £45 a day/£225 a week you can take out of the company tax-free.

Just remember there is a 10,000 mile limit for this allowance before it reduces (to 25p, I think), but you should be within that if it is just a 3 month contract.

[SueEllen]

From someone who has done a lot of commuting:
1. If your train line doesn't have loads of complaints about lateness, and,
2. If you can get a first class ticket on the train, or you are guaranteed a seat in standard class

Then take the train.

You can read, sleep or play games on the journey.

You don't actually gain much from driving as even if you have a fuel efficient car, the money left over after paying for fuel will be paying for the wear and tear on the parts.

[tractor]

...

If you claim mileage allowance (@HMRC prescribed rates, anything over is not personally tax free), this is tax-free, i.e., reduces your CT liability plus does not count as part of your personal allowance.

Claiming the train fare instead also reduces your CT liability but doesn't give you anything 'extra' (I'm ignoring the wear/tear aspect on your car here of course).

At 100 miles per day x 45p per mile, this is £45 a day/£225 a week you can take out of the company tax-free.

Just remember there is a 10,000 mile limit for this allowance before it reduces (to 25p, I think), but you should be within that if it is just a 3 month contract.

You should be aware of the above, your company can pay higher than the prescribed rate and claim it as a legitimate expense, but you will be personally liable to pay tax on the difference IIRC.

+ WSES

[BS1397]

If you are only paying £300 a month on the train then I suggest you drive because you probably don't live too far anyway (You didn't say where from/to?). It cost £521 a month (20 days usage) for the privilege of being mugged by Thomas the Tank with no guarantees of getting a seat or arriving on time, assuming the Toilets work which often they either don't work or too disgusting to use.

Seriously, a lot of the new trains cram 5 seats across, each measuring 14 inches per person which is fine for short journeys (say 20 min) and children, but for adults spending nearly 2 hours then it is no joke when you end up like me having Physio because of bad train posture. I drive now as much as I can.

As long as you can park and have a nice reliable 55+ mpg little motorway runner (C3 HDi or an Audi/VW 1.9TD of some sort), then you might as well enjoy your own company, listen to Air Guitar music or radio comedy and never have to put up with any tired miserable faces with garlic/ciggy breath, and stop to rest if your back is getting tired.

I guess if you work out how much it costs you per mile by train vs car, and factor in the Tax & Health benefits, then only you can decide which is best.

TopGear Rules (Fifth Gear is rubbish)

[SueEllen]

BS1397 your company is allowed to send it's personnel by first class travel if there is a business benefit.

[DaveB]

I've done both to the the same place (Leeds) on different gigs. Given the option now I would take the train. Yes there can be delays but they happen on the roads as well and frankly if I'm going to be stuck I'd rather be stuck on a train.

You'll also find that after a while the driving wears you down, there is no chance to switch off mentally between the office and home.

Finally, it will knacker your car if you do it for any length of time. You'll be putting an extra 2000 miles a month on it. Do it for long and it soon adds up if you try and keep up the service intervals tyres and general wear and tear. The milage allowance makes it look attractive but you will be no better off in the long run.

[BS1397]

BS1397 your company is allowed to send it's personnel by first class travel if there is a business benefit.

News Flash!!! The difference between 1st & 2nd is just a head cloth that says "First Class", Unlike the old Slam Shut trains where you actually had a visible difference in a closed section with wider better seats. So if now the seats are identical and the toilet is the same stinker, and the ticket clearly doesn't promise you can get in the first place... I think the inflation busting fare increases year on year is expensive enough as it is.

[Wanderer]

driving 100 miles per day in my private car. I have worked this out and it will cost about £300 per month. But I can claim around £600 per month.

The cost of the same journey by train will be £300 per month.

When you claim something as an expense, it reduces your company profit so your company doesn't pay tax on that money. Your LTD is probably paying corporation tax of 20%.

If you took the train and paid £300 then you'd reduce the CT by £60 (there is no VAT on train fares, by the way). If you claim £600 in mileage expenses (but only actually spend £300) then that corporation tax is reduced by £120 so you are £60 a month better off if you take the car.

But be careful when you think about the expense of running the car. I don't think you can realistically run a car for 15p a mile as you think unless it's extremely fuel efficient or an old banger which isn't worth anything so it's not going to depreciate much. Are you thinking of the cost of fuel or the total running cost including servicing (you are going to be racking up the miles), tyres (you will easily wear out a set in a year at this job), brakes, depreciation (25k miles/year will kill your car's resale value) etc.

Weigh up your options carefully, though you can always switch from train to car and back again as circumstances require so it's not really a big deal.

[Scrag Meister]

Is there work that you can do whilst on the train? Perhaps you can allocate your commute into your working day so that you are actually in the office a little less.

Train is, mostly, a more relaxing trip than concentrating when driving.

I would have thought fiscally you would be well remunerated if you drove. As others have said it is only 3 months,
@ 45p per mile, 100 miles per day. That I would have thought would be a good contribution to maintenance, tax, insurance and some left over.