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Tax Nuggets - Quick guide to motor expenses

Self-employed GPs and the rules for claiming motoring costs. By Shoaib Zulfiqar and Russell Finn

It is normal for everyone who is self employed to claim motor expenses. However, GPs have to be careful in deciding what percentage should be claimed as business use.

Claiming for business use
While working out the business use percentage many GP partners ignore the fact that ‘home to work’ travel is not allowable. So, for example, if a self-emp­loyed medical practitioner travels everyday from home to their practice premises, mthen that travel is not allowable. The allowable travel will be home visits, educational courses and any other work related travel.

Another point to note is that if a GP partner keeps a mileage log and wishes to use the fixed rate mileage claim then the claimable motor expenses are 45p per mile.

You cannot claim any other costs, such as insurance or road tax, on top of your mileage as your mileage is multiplied by 45p for every business mile. Similarly no capital allowances (see below) are claimable if fixed rate mileage allowance is used while calculating the motor expenses.

The above methods have to be used on a consistent basis and cannot be switched over from year to year.

Revenue and Customs has kept a close eye on the claim of business use for motor expen­ses and investigates any claims which it considers to be high.

The cost of travel from home to work is not allowable (Photograph: Istock)

Capital allowances on cars
Included within a standard motor expenses claim is a deduction for the capital cost of the vehicle known as a capital allowance. Most people would know this as the depreciation on the car, however capital allowances are a standardised version for taxation purposes.

Since 6 April 2009, the rates of capital have been 20% (18% from April 2012) per year for newly purchased vehicles, emitting between 160gCO2 per km and 110gCO2 per km (this information is located on the V5C vehicle registration certificate, formerly known as the log book). For cars over 160gCO2  per km the rate is 10% (8%).

For fuel efficient cars under 110gCO2 per km the allowance is 100% of the purchase price. However, this only applies to brand new vehicles. If the car is secondhand then it would be subject to the above rules with no 100% allowance.

Cars that have been owned since before the new rules came into effect are still subject to the old capital allowance rules of a 20% (18%) deduction each year with a maximum allowance of £3,000 per vehicle.

One interesting thing that comes out of the new legislation is that motorcycles are no longer subject to the above rules and are treated like normal plant and equipment, so would qualify for a 100% allowance under the annual investment

Please note the amount you can claim for tax in each case will be reduced to reflect your business use of the vehicle.

  • Shoaib Zulfiqar is a tax manager and Russell Finn is a client principal with Ramsay Brown and Partners Chartered Accountants www.ramsaybrown.co.uk 

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