Owners of hospitality businesses, trading as a sole trader or partnership, who use their own vehicle for both business and pleasure have choices in the way in which business cost of the vehicle is allowed.
Broadly the vehicle may be placed as an asset within the business, or motor costs may be calculated on a mileage rate.
Vehicle in the Business
If a vehicle is pre-owned at the start of the business a value needs to be placed upon it to come into the business and the milometer record noted. The value could be provided by a car dealer, or one of the published valuation guides for example.
The vehicle then becomes eligible for capital allowances over the years, writing off its cost. At disposal there may be a balancing allowance or balancing charge dependent on the book value of the vehicle and its sale value.
The costs of running the vehicle are charged 100% to the business – but read on!
A log of business use is required. Suggest – date of journey, purpose and distance in miles. At the end of the year this log is totalled, and the milometer reading noted.
By calculating annual miles travelled and comparing this to the log of business miles, a business miles percentage is derived.
The business miles percentage is applied to the capital allowances and running costs and the net calculation is the allowed business cost of motor.
Mileage Rate
Rather than putting the vehicle and motor costs through the business an alternate is to apply the rate of 45p per mile to business miles travelled. The rate reduces to 25p for miles above 10,000.
Once a mileage rate has been used the vehicle cannot then be placed in the business.
Travel Expenses
Travel expenses are separate to motor costs, and bus and train fares can be claimed when used for business purpose.
