Motor expenses - what are they and how do you claim them?

There are costs to running a business, and whilst electricity, gas and water seem like obvious expenses to a traditional brick and mortar business, there are other costs such as motor expenses that may not seem as clear cut.

There are tax deductible costs that can be claimed through your limited company for motor vehicle and travel expenses, though these are often misunderstood. This blog aims to demystify which expenses are claimable, how you claim them, and how to calculate them.

Company car costs

If a car is owned by the company, then it is the responsibility of the company to pay for the servicing and maintenance of that car e.g. buying new tyres, paying road taxes, and purchasing insurance for the vehicle. The company may also benefit from reclaiming VAT and tax reliefs where applicable.

Company car fuel

When it comes to fuel costs for company cars, the business can offer to pay on behalf of the employee for fuel incurred on business journeys. However HMRC argues that the employee would likely be receiving an extra benefit (benefit in kind) as there will likely be an element of private usage of the vehicle. 

Alternatively, an employee may elect to pay for their own fuel costs and in turn claim expenses for the journeys they complete for business use. The rates for the mileage are highlighted later in this blog.

Personal vehicles

With personal vehicles (i.e. those owned privately by employees and directors) the rules are different but very simple. Expenses incurred by a vehicle are the sole responsibility of the vehicle's owner and the business is not liable for any expenses such as tyres, service costs, insurance or taxes.

What can be claimed

However, where an employee uses their personal vehicle to travel for business purposes, they are entitled to claim fuel expenses. There are some caveats however;

• the claim may only be for journeys done in the course of business. 

• you cannot claim for mileage expended travelling to and from your principal place of work.

With more flexible working seeing an increasing number of employees working from home, HMRC deems both your home office and any physical office (e.g. if you work from the office X days per week) as your principal place of work. Travel to either address cannot be claimed.

The mileage rates for personal vehicles are:

Calculating claims

When a mileage claim is made, it must state the date, who was visited and how many miles are being claimed for. To adhere to best practice, it is advised to complete an expense claim each month.

There are a number of ways to keep track of your journeys, from a simple spreadsheet log, to apps like Tripcatcher which can connect to your accounting software.

Conclusion

Understanding what you can claim for with both private owned and company cars will help you get the most out of your expense claims. And as always, be aware of the costs you are attempting to claim for as some may not be allowable.