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Non-statutory business mileage deductions using the approved mileage allowance payments rates have been withdrawn along with agreements for board and lodging private use adjustments.
They have been replaced by simplified expenses rules as part of easier-to-follow legislation covering income tax for small businesses.
Firms can calculate allowable expenditure on vehicles using a flat rate based on mileage. The method of calculation must continue to be used for as long as the vehicle remains in the business once the rate has been used in relation.
Non-statutory business mileage deductions using the approved mileage allowance payments rates have been withdrawn along with agreements for board and lodging private use adjustments.
They have been replaced by simplified expenses rules as part of easier-to-follow legislation covering income tax for small businesses.
Firms can calculate allowable expenditure on vehicles using a flat rate based on mileage. The method of calculation must continue to be used for as long as the vehicle remains in the business once the rate has been used in relation.
If capital allowances have already been claimed in respect of a particular vehicle, the flat rate cannot be claimed in respect it.
Where the simplified rules are not used, allowable expenses and capital allowances are calculated in the normal way unless the firm has opted to use the cash basis, in which case capital allowances are used only for cars.
Where premises are used partly for private purposes as a home, businesses can choose under the new rules to make a private use adjustment based on a flat rate amount. The amount is subtracted from actual expenses incurred, to arrive at the amount deductible as a business expense. Only premises used mainly for the purposes of carrying on a trade will qualify.
The flat rate amount is based on how many people, including children, use the premises as a private home each month or part of a month. It includes all household goods and services, food and non-alcoholic drinks and utilities, but not mortgage interest, rent of the premises, council tax or rates.
A reasonable apportionment of the expenses should be made based on the extent of the private occupation of the premises.
Board and lodging agreements are withdrawn from 2013/14, but a firm with an agreement for 2012/13 can use it for the following year as an alternative to the simplified expenses method or the normal statutory basis.
The simplified expenses rules – covered in Revenue & Customs Brief 14/13 – also allow sole traders and partnerships to claim a flat rate deduction in respect of “use of home for business”, as an alternative method to recording actual expenditure and apportioning the business element.
The monthly flat rate includes household running costs such as heat, light, power, telephone and broadband.
A business that decides against using the rules will need to use the normal statutory method instead. In such cases where private use of telephone or internet costs does not form a significant proportion of service use, HMRC will accept that the full amount of expenditure can be claimed.
