Accounting Terminology

[ASB]

Thanks Greg, I think that probably covers all the scenarios.

[Greg@CapitalCity]

Hi ASB,

This is the kind of thing that can start to get very complicated very quickly because there are so many scenarios to consider. But some general pointers for you are;

(1) Generally I would always advise a client to avoid putting business expenses through the personal tax return as they are more easily picked up and challenged by the HMRC (though I think Mileage would survive a challenge easier than most expenses);
(2) For a higher rate tax paying contractor with a £7,475 salary, putting £1,000 in mileage through the personal tax return rather than the business would result in a £25 tax saving (when including corp tax and personal tax);
(3) Following on from (2), you would also have an extra £800 in retained earnings in the business to extract, which would incur a further £200 in personal tax - so overall you are worse off;
(4) If you have earnings from other sources (or get a salary > £7,475) then the picture changes. Adding say £2,000 of net interest income to the above scenario, the overall tax savings for putting mileage through the SATR is £125 - however you are still stuck with the problem highlighted in (3) above;
(5) The only other way to treat the extra retained earnings from (3) is to extract it from the company when closing and pay 10% CGT assuming ER applies;
(6) Summary 1: So if you are a higher rate taxpaying contractor with a £7,475 salary, there is no benefit in putting mileage through SATR.
(7) Summary 2: The only scenario I can see a tax saving is if you are a higher rate taxpaying contractor with a £7,475 salary AND have other forms of income AND intend to keep your mileage savings as retained earnings until you close the company AND are eligible for ER, then for each £1,000 in mileage you put through SATR you will save £45 in tax;
(8) Summary 3: I think just better to claim mileage through the company

I have used 2011/12 tax rates in the above calc cause its easier for me

[ASB]

(c) Start booking the cost of travel against the 'Mileage' category at 45p per mile, and also use your personal CC when paying for your fuel;

Greg

[ot]

Is it still the case that for a higher rate taxpayer it may be possible to obtain more relief by not claiming the expense from the company (obviously this will attract CT due to the increased the profit).

Instead claim it via the SATR (in which case relief can be obtained at ones highest tax rate?

Though it does depend on the source of ones income, if it is all from the company then the higher tax paid on dividends in the first place will neutralise it, but if there is income from a different source e.g. savings income it could end up being beneficial (but possibly not actually worth the effort of working out).

[In my case I had various income streams and was able to reduce my tax bill by a couple of hundred overall; or maybe I just calculated it wrongly ]

[Greg@CapitalCity]

My question is - eveytime i fill the tank, i use my business card.
Do i not record these transactions as they will show on my business bank statements.

See, you could also use your business card to pay for your next holiday to the Med. The point here is, just because you are using your business card to pay for fuel, does not mean it is an allowable business expense. I would suggest you;
(a) Record the fuel amount into your Directors Loan account;
(b) Pay the same amount of money back into your business account (from your personal bank account) to reverse the Directors Loan charge;
(c) Start booking the cost of travel against the 'Mileage' category at 45p per mile, and also use your personal CC when paying for your fuel;

[JoJoGabor]

I cannot ephasise this point enoughg. Get an accountant at least for the first two years. No accounting software will help you avoid the pitfalls

[mudskipper]

Still a little confused.
Im a contractor setup as a limited company.
I use my vehicle for both personal and business use.
Im making sure i keep a record of the mileage when doing business trips.


My question is - eveytime i fill the tank, i use my business card.
Do i not record these transactions as they will show on my business bank statements.

Thanks

You're making things very complicated for yourself. Assuming the car is a personal vehicle which you also use for business (make sure your insurance covers this) then fill the tank with your own money, and claim the 45p per mile. By putting fuel on the company card, you'll need to apportion part of it for personal use. Check with your accountant - you may be able to offset what you've already put on the business card against expenses, or call it a director's loan.

If you haven't got an accountant you really do need one, at least for the first year or two till you know what you're doing. And have a read of the First Timers guides. ----->

[northernladuk]

Get an accountant. Sounds like by giving you some straight advice he could be saving his rate. Don't run your accounts based on guesswork and free internet forums. You are legally responsible for your finances and if you cock it up there is no end of trouble that can come your way. You are a business now so get an accountant to at least help you for the first year.

[sapsaint]

Still a little confused.
Im a contractor setup as a limited company.
I use my vehicle for both personal and business use.
Im making sure i keep a record of the mileage when doing business trips.


My question is - eveytime i fill the tank, i use my business card.
Do i not record these transactions as they will show on my business bank statements.

Thanks

[Sockpuppet]

Normally you wouldn't claim fuel, you'd claim a flat rate mileage - 45p per mile <= 10K miles. That goes under mileage.

Only if its not a company car!

[sapsaint]

Wow - that was a quick response!!

Im setup as a limited company - and i pay for my fuel using my business account.
The vehicle is however being used for both personal and business purposes.

Given that im paying for the fuel using my business account, do i not record this in my accounts?
Im still confused about how to log the fuel expense...

Thanks

[mudskipper]

Hi there
Was wondering if somone could help me.
Im completely new to contracting - and i am currently getting to grips with getting my books in order.
Ive just signed up with Clearbooks and i am in the process of importing all my sales/purchases.

Im struggling to determine which categories the following purchases need to be allocated to. Can someone help me?

Purchases:
- Fuel for vehicle.
- Cofee paid for during business meeting.

Categories Available:
- Cost of sales
- Cost of sales
- labour
- materials
- CIS labour cost (20%)
- Other income
- Reclaimed expenses
- Administrative Expences
- Salaries
- PAYE
- Employees NIC
- Employers NIC
- Pension
- Rent and Rates
- Heat and lighting
- Insurance
- Telephone
- Internet
- General Admin
- Subscriptions
- Printing and Stationary
- Cleaning
- Postage Packaging
- Travel
- Mileage
- Subsistance
- Advertising
- Marketing
- Accounting Fees
- Legal Fees
- Entertaining Staff
- Entertaning Client
- Operating Costs

Thanks i advance.
SAP

Normally you wouldn't claim fuel, you'd claim a flat rate mileage - 45p per mile <= 10K miles. That goes under mileage.

Food/drink goes under subsistence - make sure you keep receipts.

[sapsaint]

Hi there
Was wondering if somone could help me.
Im completely new to contracting - and i am currently getting to grips with getting my books in order.
Ive just signed up with Clearbooks and i am in the process of importing all my sales/purchases.

Im struggling to determine which categories the following purchases need to be allocated to. Can someone help me?

Purchases:
- Fuel for vehicle.
- Cofee paid for during business meeting.

Categories Available:
- Cost of sales
- Cost of sales
- labour
- materials
- CIS labour cost (20%)
- Other income
- Reclaimed expenses
- Administrative Expences
- Salaries
- PAYE
- Employees NIC
- Employers NIC
- Pension
- Rent and Rates
- Heat and lighting
- Insurance
- Telephone
- Internet
- General Admin
- Subscriptions
- Printing and Stationary
- Cleaning
- Postage Packaging
- Travel
- Mileage
- Subsistance
- Advertising
- Marketing
- Accounting Fees
- Legal Fees
- Entertaining Staff
- Entertaning Client
- Operating Costs

Thanks i advance.
SAP