Contractors' Questions: Can I claim car hire costs?
Contractor’s Question: As a new contractor, working through an umbrella company, I’ve got relatively up to speed with expenses and claimable deductions for business mileage, but haven’t seen much about car hire. Can you offer some guidance?
Expert’s Answer: In terms of business mileage, HM Revenue & Customs sets the rates. You can currently claim 45p per mile for the first 10,000 business miles you do in your car each year and then 25p per mile after that. This mileage includes travelling to and from temporary locations and between different sites. Of course, you need to get valid VAT receipts for fuel and send these when you make your claim each week or month.
Reasonable car hire charges can be claimed when used solely for business during the working week. So if you are hiring a car for 7 days this is limited to 5/7ths of the cost (due to being able to claim for the working week only) and original receipts must be provided. Remember, you can only use the hire car for business. If you use it to go shopping, pick up the kids from school etc. then you could incur a taxable benefit which would involve a significant tax liability.
If you claim for car hire the amount you can claim for mileage is reduced to the cost of the fuel only. The amount you can claim depends on the fuel type of the car and engine size, but is typically around 18p per mile.
Unfortunately though, for any speeding, parking or clamping fines you are on your own! These cannot be claimed. You can of course head-off these potential costs to you if your main mode of transport is the pedal powered variety. For such cyclists, you can claim 20p per mile for your business mileage.
The expert was Rob Crossland, founder of Parasol, an employment and umbrella company.