Miles more tax relief on a private car

JB writes: I own my own limited company, which contracts out my services as an aerospace engineer. When I started my company I was advised to operate my car through it, and as such the company met all the car expenses. In the last year I have had to pay £5,000 in additional PAYE on my salary and Class 1 NI contributions as a result of the benefit in kind. I am now wondering whether I would be better off owning the car personally, especially as I understand the rules for travel expenses will be changing from April for site-based workers and as a result I will be able to claim the mileage from my home to my place of work. I would welcome your comments.

Answer

In your situation the decision regarding whether your car is owned through your company or by yourself privately is purely a question of working through the respective numbers. The scenario will change from one person to another, depending on the type of car involved and the number of miles travelled on business. Therefore, there is no general rule that will assist, other than to say that the more business miles you travel, the greater the probability that you will be better off to own the car personally. When calculating the costs of owning the car individually, you should deduct the monies that you can claim from the company using the mileage rates as set out under the Fixed Profit Car Scheme. These rates are set annually by the Inland Revenue and vary, based on the capacity of the car, and are widely accepted. There is one area that is straightforward and that is whether your company should pay for your private fuel. The scale fuel charge is a fixed amount for each tax year depending on the size of the car, and therefore the cost of your private fuel can be directly compared to the increased tax cost and a decision made accordingly. The new rules from April covering site-based workers allow for travelling expenses from home to the site to qualify for relief from tax along with the costs of staying at the site. However, the definition of a site-based worker is someone who works at a succession of places as part of the same employment, spending a modest amount of time at each place. A few months is considered a modest amount of time.