Question:

“I am a freelance digital marketer (trading as a Limited Company) and I have clients all over the country who I meet with quite a lot, often at their offices. Although some of my travel is on the train, for most of it I use our family car to drive to the meetings (we only have one car). I assume the travel is an allowable expense? What is the best way for me to claim these mileage / car costs back from my company and what records do I need to keep?”

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Answer:

You are correct in stating that your travel costs to visit clients are an allowable expense for corporation tax purposes. There are some rules restricting the claim of travel if you travel to the same location regularly (if 40% or more of your work time is travelling to a location) but it sounds like that is not an issue for you.

With regard to your train costs it will be important to keep receipts for these journeys and keep a record of what each journey was for.

In the case of your mileage, the best way to ensure the most appropriate treatment is to keep a mileage log detailing the reason & details of each trip and the total mileage. The current mileage rates (for the 14-15 tax year) are 45 pence per mile for the first 10,000 miles in any tax year and 25 pence thereafter. This can either be claimed back from the company by raising an expense claim and the money being transferred from the limited company bank account to you personally, or can be simply credited to the directors loan account on a regular basis (ensuring that at the company’s year-end all the appropriate mileage for that period has been claimed). Some of our clients will simply send us one schedule of their mileage for the whole year which we will then include when we prepare the year end accounts.

If you would like a template of a mileage log please contact us and we will be happy to supply you with one. Alternatively if you are using FreeAgent there is a helpful screen where you can enter each individual journey and the appropriate value will be automatically credited to your expense account and be shown as a travel expense.

There is an alternative method of claiming car costs from a limited company which is where the company owns the car and you are able to use it for both personal and work purposes, but this is then seen to be a personal “Benefit in Kind” which causes taxation issues on you personally. The Benefit in Kind tax on company cars has been steadily increasing over the last few years and is set to continue to do so. These days we very rarely see a situation where it is more tax efficient to use a company car than to claim the business mileage so our default advice tends to be to use the mileage method outlined in this article.