Soletrader Using the Stautory Mileage Rates

I run a small business and have been using the HMRC statutory mileage rates claiming 40p per mile for the first 10,000 business miles and 25p per mile thereafter. I have now exceeded the VAT threshold in the current year. Can I continue to use this method?

1st August 2008

The statutory mileage rates of 40p/25p per mile is only available to business who have turnover under the current VAT threshold (£67,000 from April 2008). Using this method is intended to make things simpler for small businesses. It is not compulsory and you can only use the mileage rate basis if it is applied consistently from year to year. You can only change to or from an `actual' basis when a vehicle is replaced.

As you have exceeded the VAT registration threshold, you must continue to use the scheme until you change your car, at which point you can change to the “actual” basis of calculation where you claim expenses relating to running and maintaining the car (fuel,  oil , servicing, repairs, insurance, vehicle excise duty and  MOT costs) in addition to capital allowances on the cost of the new vehicle .

As you only change to the actual method after you replace the vehicle, it may mean that you will continue to use the scheme for several years after you have exceeded the VAT registration threshold.

By Jo Nockels

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