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Practice motoring and the taxman

Ensure you claim full tax relief on work-related car costs with the help of this guide, by Simon Gray.

Travelling from home to the surgery is not classed as business travel for tax purposes, but travelling from home to a patient does count (Photograph: Alamy)
Travelling from home to the surgery is not classed as business travel for tax purposes, but travelling from home to a patient does count (Photograph: Alamy)

In general, self-employed GPs, including locums, can claim tax relief for their business-related motoring costs each year for items such as fuel, road tax, insurance, parking, servicing and repairs.

They can also gradually write off the cost of buying a car by claiming capital allowances related to their business use.

The rules are different for salaried GPs.

Self-employed GPs
GP partners' expenses are recorded in their annual personal practice expense (PPE) claim. While not part of the practice's annual accounts, PPEs are part of the partnership tax return, and will have a bearing on the amount of income tax paid by the individual partners.

Singlehanded GP principals' motoring expenses need only be entered in their personal tax return and the same applies to locum GPs.

Business use
There is often confusion about what exactly constitutes business use. Journeys between a GP's home and surgery are not normally allowable for tax purposes.

However, where a GP is on call and at the time is based at home, a journey involving a call out to a patient counts as genuine business travel and should be recorded as business miles.

Some GPs work sessions for out-of-hours providers requiring them to travel to the out-of-hours call centre to work from there. Travelling to and from their home or practice to the call centre is allowable.

However, the so-called 'temporary workplace' rules can revert to the more stringent regular commuting rules after 24 months, so ask your accountant for advice.

Mileage logs
To establish your business use percentage, you must monitor all your mileage over a period of time to work out how much of it was actually for business.

Keep a mileage log of all miles travelled (including travel to the surgery and private/family trips) for a period of one month or for a length of time that represents your usual driving pattern. Analyse the log to calculate the business percentage which is applied to all the motoring costs you have during the year to arrive at an overall figure deductible for tax purposes.

If HM Revenue & Customs (HMRC) investigates your claim, one of the first things it will ask you is to demonstrate how the business percentage was arrived at.

I recommend that GPs keep a new log for a separate sample month each year.

Capital allowances
Self-employed GPs can also claim tax relief for depreciation. A capital allowance is a tax deduction to reflect the fall in value of the vehicle over time.

In the past, the rate of capital allowances (how quickly they are given in relation to the car's purchase price) was determined by a fixed percentage subject to, for more expensive cars, an upper limit.

Currently the rate at which tax relief is given depends on a car's CO2 emissions. Generally, 'gas-guzzlers' with high emissions get lower capital allowances rates so the relief is spread over more years than vehicles with 'greener' (lower) emissions.

Once the level of capital allowance has been determined (let your accountant work this out as it is not as straightforward as keeping mileage logs), the business percentage relating to your other motoring expenses is applied and reduces the capital allowance accordingly. The resulting amount forms part of a partner's PPE.

Salaried GPs
For salaried doctors who use their own car for business purposes, as opposed to a car provided by the practice, the rules are somewhat different.

Unlike a GP partner they do not complete PPEs, but may still be able to claim tax relief for certain expenses. With recurring costs, such as fuel and insurance, the tax relief they get depends on HMRC's authorised mileage rates.

Under this system, relief is given on a flat rate based on actual business miles travelled during the year. Therefore, a salaried GP must keep a detailed mileage log of all the business miles they have clocked up over the whole tax year.

Once the total business miles travelled in the year has been determined, a fixed rate per mile is applied. HMRC's rates are currently 40p for the first 10,000 annual business miles and 25p per business mile exceeding this.

This may appear generous but remember the mileage rate is intended to cover not just the cost of fuel but wear and tear.

Reimbursed mileage costs
If a salaried GP receives reimbursement from the practice for their business miles, any amount received in excess of HMRC's authorised rates should be declared to the taxman and will be subject to income tax.

Likewise, if the salaried GP receives an amount which falls short of HMRC's mileage rates, or they get no refund from their employer, they can make a claim for the difference on either a tax return or a stand-alone claim form.

CAR COSTS YOU CAN SET AGAINST TAX

You can claim a proportion of your annual motoring expenses relating to business use. These expenses include:

  • Fuel.
  • Road tax.
  • Insurance.
  • Parking.
  • Servicing.
  • Repairs.
  • Interest on a loan to buy a car.
  • Depreciation (via capital allowances).
  • Car lease payments.
  • Simon Gray is a partner with specialist medical accountants Henton & Co LLP, www.hentons.com

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