Last year I sold my car and bought a van for use in my business. I pay for all vehicle related expenses, including diesel, out of my business bank account. I have kept a record of my business and personal mileage, but am unsure of how to account for this.
If, for example, I did 10,000 miles in the year and 5,000 of that was personal mileage, how then do I deduct that mileage to reflect that in Quickfile?
Sole trader
Sole Trader:
Example:
You agree 20%(or what-ever) private use of vehicle.
Vehicle expense was ÂŁ200
Net Profit per income statement ÂŁ10,000
Calculation:
Net profit for the year. 10,000
Add disallowed expense:
Motor Expense, ÂŁ200 X 20%. 40
Trading Profit (for taxation). 10,040
Vehicle Mileage and CO2 is a Capital Allowance Calculation
Youâve unintentionally made that a bit complicated for yourself, but in your example if half of the use of the vehicle was personal then you would need to reduce your motor expenses by half. So you could use a journal to CR fuel and DR owners drawings for 50% of the value, and then repeat that process for all vehicle related expense accounts. The other option is as per @KUBE answer where you donât change QF but you make the amendments actually on your tax return using the disallowed expenses boxes.
Thanks for your reply. Can you explain what you mean by that please. Do you mean by putting through my business account or the way I worded the post? Just trying to learn to make things less complicated in the future. Thanks.
If youâre using the vehicle for business and personal it would be simpler in terms of transactions to pay for all fuel, repairs etc etc yourself from your own money, and then keep a record of business mileage as you have been doing, and then reclaim the mileage from your business at the appropriate mileage rate. You could do that once a month/quarterly/annually as suits.
Ah I see now. Yes, that is what I did when I had a personal car. Just thought it would be better putting it through the business account as I now have a van, which I use for business and donât do a lot of personal mileage. My van insurance is quoted as a commercial vehicle policy, but my breakdown cover is not.
I will probably go back to doing that in the coming financial year. Is there any real advantage then to having a business vehicle (from an accounting point of view)??
It really depends on your ratio of business to personal. If your personal use is only say 5% of the overall miles then Iâd say carry on as you are with the expenses from the work account, and make a 5% adjustment for personal use on the tax return, rather than in QF. From your example in the first question I was going on the basis that the personal use was quite high.
From a tax/accounting point of view there isnât a blanket answer to that question. The mileage rate can be more beneficial in some cases and actual proportioned expenses can be more beneficial in other cases, more info would be needed for a proper comparison which is not really appropriate for a forum post. Generally speaking if you have minimal personal use youâre probably better off having the business pay the costs.
I just donât like giving out exact details on a public forum, but itâs more like 60% business, 40% personal. I only used a 50-50 example for my own personal benefit to make it easier to calculate. I suppose on that basis, itâs tipping more towards a mostly business use basis, so more likely to be more cost effective to put through the business.
Yes, Iâd probably make the adjustment only on the tax return through rather than amending QF. Donât forget that you also need to reduce your capital allowance claim by the same percentage.
Oh my goodness, this is getting complicated! What does that mean? Think the 45p per mile x mileage was a lot easier, but as Iâve logged all my vehicle expenses in QF I guess Iâll have to go through with this now. And why just put an adjustment through on tax return only? Please explain how I do this.
Tax is complicated, itâs why people have accountants 
When you claim the cost of purchasing the van through capital allowances, youâll need to knock off 40% (or whatever percentage youâre going with) from the claim to represent the personal use.
To put an adjustment of expenses on the tax return you use the disallowable expenses boxes. The reason I would do this rather than changing QF is because itâs easier, and from an accountancy perspective itâs quite normal to make adjustments to profit as part of the tax calculation.
Ah, now that makes sense. Thanks for explaining. So how do I actually do a journal to CR fuel and DR owners drawings for a percentage of the value, as you had suggested earlier?
No worries.
To do a journal go to Reports>Journals>Create new journal use the date as the date of your year end and give it a title, put the nominal code for the expense account and the figure in the CR column, then on the next line nominal cost for drawings and the figure in the DR column, press save.
Hi Jeremy,
If you use the âactual costsâ method for accounting for yourâ new van costs then you must stay with that method for the life of the van.
You cannot switch methodâs until you switch vehicles.
You can still decide to use the mileage method before year end, you would need to bulk switch all previous tagged van related costs to drawings and enter the 45p cost for the vans annual business mileage as a journal from drawings
Two further points: if you use the 45p method then you canât claim capital allowances on the purchase price as the mileage allowance is supposed to include a bit for depreciation. And you canât use the mileage method if youâre trading above the VAT threshold at the point where you acquired the vehicle (this probably doesnât apply to you but might to others who find this thread in future) - you can use it if youâre below the threshold at this point but registered voluntarily, and you can (must) keep using it on a vehicle you were already claiming for before hitting the threshold, but a new vehicle bought after this point must use the actual costs method.
How do I this George?
From the chart of accounts select all motoring related expenses and bulk change the nominal account to your directors loan account or its equivalent proprietors money in/out account.
Then do a purchase invoice for all business miles at 45p per mile as motoring expenses and pay it from your directors loan account or equivalent.
Note
Only the 1st 10,000 miles is 45p per mile, any more than 10k its 25p per mile
I tried doing that using âMove to new codeâ but I cannot find any reference to Proprietors Drawings. Am I in the wrong place?
It should be nominal account no. 1202 Proprietors Drawings Account
see this quick video for its location in the COA:
https://www.screencast.com/t/kPuIlijw7HH
its classes as a virtual bank account so its shown in banking
its its not there you can add it see clip below:
https://www.screencast.com/t/q6L3ToYjlj
Thanks George. What I mean is that I went to Fuel and Oil (MOTOR) (7300) on the Chart of Accounts. In Account Detail for that code I selected all entries and then the recoding tool but could not move these entries to 1202 Proprietors Drawings Account as it does not show up in the drop down box. I am I in the wrong place? I thought that this would be how you bulk tag.