June questions and answers

Newsletter issue - June 2018.

Q. I use my own car for business. My employer reimburses me 20p per mile. In 2017/18 I travelled 15,000 on business. I am a basic rate taxpayer. Can I claim any tax relief for the use of my car?

A. There's a statutory tax exemption for Mileage Allowance Payments (MAPs), which if paid below a certain amount will not produce a liability to employees. Payments in excess of the exempt amount are taxable. The exemption does not apply to 'round sum' expense allowances. From 6 April 2011, the standard rate for cars and vans is 45p per mile, reducing to 25p per mile for mileage in excess of 10,000 miles per tax year.

Where the employee receives no mileage allowance payments, or the payments are less than the statutory limits, he may claim a deduction from his emoluments equal to the statutory mileage allowance, or, where appropriate, equal to the excess over the payments received.

As 20p per mile is less than the HMRC approved mileage rate of 45p for the first 10,000 miles and 25p per mile thereafter, you may claim tax relief as follows:

Allowable mileage payments:

10,000 miles at 45p per mile = £4,500

5,000 miles at 25p per mile = £1,250

Total allowable £5,750


mileage expenses received:

15,000 x 20p per mile (£3,000)

Tax relief due £2,750

Note that the amount of tax relief due is the amount on which you may claim tax relief at your marginal tax rate - it is not the amount of tax that may be reclaimed from HMRC.

Q. I am an employee and am liable to income tax at the higher rate. I also receive income from a rental property that I own. My wife does not work. If I instruct the tenants to pay the rent directly to my wife, will that absolve me from declaring it on my own self-assessment return and avoid paying higher rate tax on it?

A. Unfortunately this will not be possible. You cannot assign income to someone else - even to a spouse - to avoid paying tax on it. However, you could put the property into joint names, even if you have a declaration of trust behind the transfer restricting her beneficial ownership to a small amount (say 5%), she will be taxed on 50% of the rental income. If you want your wife to be taxed on a greater part of the rental income, you will have to transfer a greater part of the property ownership to her and make an election for tax using form 17.

Q. I am a VAT-registered sole trader. What is the VAT position if I buy a new car for £10,000 and part-exchange my used van for £4,000?

A. VAT is calculated as follows:

New car £10,000, plus VAT @ 20% = £12,000


Trade allowance on used van £4,000 plus VAT @ 20% (i.e. £800) = £4,800

Net payment is therefore £7,200

The net payment of £7,200 is the same as would have been arrived at by charging VAT on the value of the car less the trade-in allowance. However, the consequences of doing it the correct way are different. This is because the input tax on the new car of £2,000 will probably not be recoverable. In addition, the business must account for output tax of £800 on the van. The motor dealer will account for £1,200 (i.e. output tax less the input tax charged to him on the van). He will recover this input tax because he is buying a used commercial vehicle on which he will charge output tax when he subsequently sells it. The net effect is that VAT is charged on the gross value of the deal, not the net cash paid.

What our clients say about us...

  • "Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."


  • "I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."

    Neil Price - Managing Director at Work Relief Charity Recruitment

  • "Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"

    Lee Westrap MBCS - Director - Bulldog IT Services

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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk