Director’s motor expenses

I am the director of a limited company and I am buying a car personally and using it for business and private usage. The business will be paying the fuel once it can afford to – in about 6 months' time. Up until then, can I claim the 45p a mile? Can I also write off any of the cost of the car or insurance as it will be mainly business use?

1st October 2016

The mileage allowance payment of 45p per mile (25p after 10,000 miles) is designed to cover not only fuel costs but also the cost of the car itself and the other running costs such as insurance and repairs so there is no need to account for anything else. If the company is not reimbursing you, you will be able to claim the tax relief on the 45p per mile not paid by the company. When the company starts paying the allowance, there are no further tax implications. If the company just pays for the fuel, there are further issues with reporting a benefit in kind or paying for the private fuel and claiming part of the mileage allowance.

To claim all of the running expenses in a company, the car needs to be held in the company's name. You need to carefully consider putting the car in the company. Firstly, the mileage allowance payments can often result in a larger deduction for the company, which reduces its profits and therefore its corporation tax bill. But more significantly, private use of a company asset will lead to tax charges on you personally. Unless the private use is major, the personal tax consequences can often outweigh the benefit of owning the car through the company. 

It would be sensible to seek advice from a professional such as your local TaxAssist Accountant before making any decisions, as mistakes in this area can be costly.


By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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