It is possible for both the employees as well as directors of a company to claim business mileage. If you or your company hires an employee, he/she can claim from you as you are their employer. In fact, if you fail to pay them their business mileage or pay less than the rates that have been approved by HMRC, they can claim the difference at the end of the taxation year by filing P-87 or a self-assessment tax return.
In the same vein, sole traders can also claim business mileage for the relevant business journey they undertake. That said, HMRC only allows sole traders to claim mileage if they use a car, motorcycle or a good vehicle. Unfortunately, they cannot claim mileage for using a bicycle or an invalid carriage. You can still claim the costs of purchasing a bicycle for the purpose of work as well as maintenance or consumables such as tyres. If you use the bicycle for any personal activities, you are likely to decrease the claim amount. In such cases, availing the services of an accountant or a local tax office is best so that you can confirm precisely what you can or cannot claim.
What Is Maximum Amount That Can Be Claimed For Business Mileage?
You must use the AMAP or Approved Mileage Allowance Payments that have been set up by HMRC to claim your mileage. According to this standard, you can claim 45p per every mile for the first 10,000 miles. Thereafter, you can claim 25p for every mile. The rates of AMAP also include the typical running costs for your vehicle, such as insurance and maintenance. In addition to that, it is also essential to have clear records of your business journeys in your vehicle so that you can provide the authorities with evidence of the amount you have claimed and why.
The rates per mile that the HMRC allows are as follows:
- For a car or a van, the rate is £0.45 for the first 10,000 miles and £0.25 after that.
- For motorcycles, the rate is £0.24 for the first 10,000 miles and £0.24 after that.
- For bikes*, the rate is £0.20 for the first 10,000 miles and £0.20 after that.
* It is important to note that while the same AMAP applies for both sole traders and employees, sole traders cannot claim business mileage if they travel to and from work on a bicycle.
How Can You Claim Business Mileage?
In addition to the purpose of the journey, you must possess the total number of miles driven for business as well as the date log of each location and journey, so that your company can reimburse you for business mileage as an employee or a director.
How Are Business Mileage Costs Calculated?
Calculating business mileage costs is easy. You simply need to multiply your mileage with the relevant rate of mileage. It is a good idea to record your business mileage regularly as well as calculate how much money you can claim. You can create a spreadsheet to keep a record of all your journeys so that an organized system can help you at the time of filing the claim.
HMRC also inspects that all the expenses you are claiming for business mileage fit the criteria perfectly. Hence, you must save all the receipts that correspond to your claim. In addition to that, make sure that the total amount that leaves your company accounts eventually matches the total amount that has been claimed as HMRC will inspect that too. Therefore, ensure that all the records are in place when claiming business mileage, whether as an employee or a company director.
What To Do If Your Business Does Not Have The Required Funds In Order To Reimburse Business Mileage Expenses?
New businesses are hard at first. They are challenging to establish, and even if you manage to start one of your own, it will be some time before you can start earning from it. This is precisely why it is said that for a new business, income comes much later because start-ups usually need to pay a ton of expenses before reaching that stage. When it comes to business expense claims, there are two options:
- Either wait until your business has successfully generated the required income before claiming or
- Introduce your working capital yourself into the business and pay yourself back
The second option is a bit like using your credit card to pay your bills, but the capital input shows in the accounts of the company as a loan taken from the company director.
What To Do In Case Your Business Is Registered For VAT?
If your business is registered for VAT, it might be useful to create spreadsheets/records of your business mileage and then get in touch with an accounting firm to understand the complete procedure for claiming VAT on mileage. Limelight Accountancy is an expert accountancy firm that can help you get started in no time!