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What is business mileage for a limited company contractor?

Mileage can only be classified as business mileage for a limited company contractor if the miles are purely for business purposes – for example, driving from your office to a client’s office for a business meeting. There are strict rules relating to what can be claimed against as business mileage so it is important to identify this with a qualified accounting professional. HMRC do not allow private trips or trips that incorporate some personal mileage to be claimed against. However, genuine business travel can be claimed against, potentially resulting in significant savings for you or your contracting business.

Why do limited company contractors need to accurately record business mileage?

Incorrect reporting of your business mileage can lead to fines, which could be detrimental to your income. It is therefore essential you accurately record your business mileage as evidence for HMRC. It is also a legal requirement that you keep such records so this is essential for any contractor wishing to claim back mileage in relation to business activities.

Who can claim for business mileage?

Any contractors, such as a limited company contractor, using their car or in some cases a company car for journeys that are wholly and necessary for their work can potentially claim for their mileage, although claiming mileage for the journey from your home to a workplace is usually not permitted. As contractors may only be working on jobs for a relatively short period, it may be possible to claim for commutable miles depending on the length of the job and the amount of time spent on site.

Again, this can get pretty technical so it is worth checking with an accountant who will be able to advise you based on your individual circumstances.

How much can you claim for business mileage?

This would depend on the structure in which you operate as sole traders may claim differently to those working through a limited company. This will likely depend on whether you use simplified expenses, which is something to discuss with your accountant or accountancy firm. It may be possible to deduct more money if you claim for actual motoring expenses, which include other expenses incurred from the running of a car. Once again, this depends on your specific circumstances so always check with an accounting professional.

How do I keep accurate records?

As previously mentioned, business records are a requirement and not only help prevent the risk of fines, but helps you account for your allowable deductions. It is therefore important to have an effective system for capturing your business mileage information and vehicle running costs.

There are a variety of apps and devices that use GPS to track your movements in real-time providing very accurate data in relation to your actual travelled mileage. These can be cost-effective and saves a lot of time and hassle. Alternatively, simple spreadsheets could be used to record time manually to reduce costs. As long as you keep your records accurate and up to date then you can rest easy knowing you are staying compliant. Accurate records will also help your accountant so it really does pay to continuously track your business mileage.

If you would like to explore your mileage allowances and deductions in more detail with professional accountants who understand the unique needs of limited company contractors then call Gorilla Accounting on 0330 024 0406 or fill in our contact form for a call back.

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