self employment, tax and millage allowance?

[skyhigher]

Hello,

I am trying to work out what to claim as a millage allowance for using my car to travel to work as a self employed flight instructor. I used to collect the petrol receipts for each journey and claim for them, but thought it would be far easier and cost effect to just charge a millage allowance. Does anyone know if there is a specific way to work it out, or what are other instructors charging?

Thanks.
Skyhigher.

[S-Works]

The revenue publish the rates on their website.

You can charge what you want, but anything above the published rate becomes taxable as BIK.

[IO540]

See a competent accountant.

You can claim a business-mileage-pro-rated portion of your total operating cost of the car.

The nationally agreed mileage rate keeps it off the HMRC horizon, but the above general principle still applies. Same for business mileage in a privately owned aircraft...

BIK applies only to assets owned by a limited company, to which somebody in the company has access for private use.

[DFC]

You can't claim mileage allowance for travel to your normal place of employment.

So be carefull where your normal place of employment is and that when you designate a place as your normal place of work it wil stand up to scrutiny.

Therefore you will never "claim as a millage allowance for using my car to travel to work " unless it involves travel to a place that is not your normal place of work.

Rather than asking clients to pay you x amount per mile for traveling to them. Better to set a suitable fee for your services and then "compensate yourself" at the appropriate mileage allowance for the out of pocket expenses you had. This is easier to account for and you don't end up with private motor vehicle useage and insurance issues.

[HamishMcBush]

If you are self-employed and work from home, then you should be able to claim for each journey to your clients. You need to keep accurate records of dates, places visited and distances covered, then at the end of each tax year submit the relevant form and supporting information. If you take out a loan to buy your car, the interest payments can also be offset against tax. The rules may be complex and you may be better off speaking to an accountant. The HMRC website (via Direct Gov) has plenty of info and advice but it's not always easy to find the relevant parts - try phoning, they can be quite helpful

[hotcloud]

This is a very interesting thread, as it does show the considerable confusion relating to the status of self employed flying instructors. It's clearly seen on this thread that there is one school of thought that believes that there is no problem claiming mileage allowance and another school of thought that believes there is. I have been instructing for 14 years and initially I was only a part time instructor, however I have since become a full time instructor for just over two years now. I have never claimed mileage allowance as I thought I could not as the travel was seen as normal travel to work, however many of my fellow instructors have advised me that they claim the mileage as they consider their place of work as their home, even if they only work for one flying school.

It is my intention to seek clarification from the tax office, and I shall book an appointment with H.M.R.C with a view to having a one to one consultation on the matter. I am due to fill my tax return on line shortly and should I elect to claim travel expenses, it will be only be with the advice from the tax office. I am reluctant to go ahead and claim mileage allowance without advice in case further down the line they ask you to repay what was claimed.

I shall keep you advised of any developments.

[S-Works]

Even if you work from home, if you work for one school then you fall under IR35 and the limit for expense claims is one year as I understand it.

[philc1983]

Claim 40p per mile if you are genuinely self employed and do have more than one designated flying school that you work at. Use it as an expense to offset against your earnings, it is classed as 'motor' expenses on your tax return.

My accountant and the tax office have both accepted this.

Hope that helps.

[IO540]

Any decent accountant will be able to advise on how to protect a 'self employed' status.

The HMRC 'is this person SE' tests are well known.

- work for more than one client
- provide your own tools/materials
- have NO employment contract
- have NO job security
- have NO pension provided by the 'client'
- have no client-imposed restrictions on working for other clients

etc.

IR35 came about largely because of the huge numbers of computer programmers who worked for the same firm as 'self employed' or via limited companies, while being employees in all but name. It is easy enough to be SE but one cannot have one's cake and eat it.

[Whopity]

I think the issue is in establishing your normal place of work. If you travel to the same location every day to work then that is regarded as your normal place of work and you are not entitled to claim. If you go to a different flying school or location then so long as you don't go to the same place more than 40% of the time then you can claim mileage. For a number of years I had a nominal office and was able to claim mileage to my company office so long as I did not make the journey more than twice a week.

[DFC]

Before you designate your home as your normal place of work take some professional advice.

Issues such as change of use - planning issues, rates, insurance etc etc etc can raise their head.

Your neighbours may not like the idea of hoards of people coming round seeking groundschool and the extra traffic parking etc etc etc.

Your normal place of work would be somewhere that you can actually do your normal work would it not?

Can you do that at home?

It can be simpler and have less possible consequences to designate your closest aerodrome as your "normal place of work" and only get into mileage allowances if you travel a greather distance than this from your home office.

[hotcloud]

I have been to my local Tax Office (Archer House) and spoke to a Technical Adviser regarding mileage allowance from home to the flying school.He made it clear that you cannot claim mileage from home to your place of work (i.e. flying school) as this is seen as normal commuting. If however you then drive to another flying school on the same day and taught from there, the journey from one flying school to another can be claimed for as it's considered business travel. As I only work for one flying school I am unable to claim mileage allowance, well at least l now where I stand on the matter. I aslo asked if you did a lot of work from home, could it be considered as your office and therefore claim mileage to the flying school. Unfortunately the answer was no, so there it is, hope this helps.

[pembroke]

You may be interested in an article in the "money" section of the Sat. Guardian, 15th May. Apparently if you work c/o a limited company or are self employed, you can use a motorcycle as company "equipment" and make the cost of the bike ,tax deductable. If you are VAT registered , you can claim back VAT on the cost if new and from fuel used for business. I get the impression, and my accountant agrees, that the bike should only be used for the business. Unlike a company car, you are not taxed on the "benefit" of being able to use the car for private use.

[IO540]

Yes, a "car" is irrelevant. Any "reasonable" means of transport is fully allowable as a business expense if the trip is wholly on the company business.

A hot air baloon would not count, and a yacht probably would not either (there must be a fair bit of case law on the latter, which an accountant specialising in that work ought to know about). But a £150k Aston Martin can be used for business and you claim the pro-rated portion of the total annual operating cost of it. Same with an aircraft...

If this was not so, i.e. if one always had to travel via the most economical means, 1st class tickets (train or airline) would not work.

It would however really suprise me if a business owned motorbike was in some way different to a car (or a plane) and was not assesed for BIK according to the usual ways HMRC like to do that. What really counts is whether the "structure" is set up so as to prevent BIK arising. E.g. NO actual private use, contract banning private use, etc. If you tell HMRC you are a keen motorcyclist they will be onto you because they hate "hobby based" businesses. You are not supposed to enjoy your work, and if you do, you are quickly into the politics of envy department.

[Say again s l o w l y]

Here's a link to the Gruaniad article. As person who spends most of their life on 2 wheels instead of 4. I'm finding it very interesting.

The tax deductable motorbike and scooter ? if you're self employed | Money | The Guardian (http://www.guardian.co.uk/money/2010/may/15/tax-deductable-motorbike-scooter-self-employed)

Here's another article that also might be relevant.

The trouble with freelancing | Anne Wollenberg | Comment is free | guardian.co.uk (http://www.guardian.co.uk/commentisfree/2010/jun/04/freelancing-benefits)

[Need money]

I believe the motorbike clothing is allowable too (sorry not read the article above if this states it !).

[IO540]

OK, this looks like they allow 100% capital allowances on a motorbike.

But BIK will still arise if there is private use - same with any machinery owned by the company.

There is no BIK in a self employed situation. One needs to be a limited company to give rise to BIK.

[Vortex Thing]

The question you need to ask yourself is are you really self employed. No seriously are you or is it just that the school the you really "work" for does not want to accept their responsibility and pay you when you are sick, have no students or the weather is bad.

Assuming you have read the relevant legislation but can you ring up one of your mates to substitute for you or send another suitable replacement in case of your not being able to work one day. Do you own any of the building? do you pay the insurance? Do you work for more than one flying school? Do you provide all you own materials and tools, oil, AVGAS, JETA1, aircraft......

Or are the school you work for just simply avoiding their responsibility and trying to legally separate you in the case of liability?

Now on the one hand if the latter is true (and come on it likely is unless you happen to be a FE or specialized instructor working multiple sites) then you have a dilemna because if you go back to the CFI and say hold on shouldn't you be employing me they will find someone who doesn't ask such difficult questions but on the other hand if you are not one of the drops of rain that it takes to make a river the practices of these firms that refuse to do the right thin by instructors will not stop.

If the former is true though take the advice of many who said it well below. Either get a professional tax accountant/adviser or go through an umbrella company. If you get into a mix with HMRC there is only one person who is going to loose every time and it's not them. The extra bit of cash it will cost you is well well worth it.

BTW I've done both employed, self employed and even both at the same time and it does get so much more complicated than you initially think especially if you have a house or worse still have a house that you rent out and live somewhere else.:ugh:

Good luck