Contractors' Questions: Is rail mileage claimable and can I bin receipts?

Contractor’s Question: Is it hopefully true that neither my limited company nor I would have to keep the train or petrol receipts relating to costs I incurred if I travelled to a client’s workplace? Also, if I travelled by train, can I claim back mileage or can I only claim back train ticket costs?

Expert’s Answer: Expense receipts should always be obtained where possible and retained by your company for a minimum of six years. There is a legal responsibility, as a director, to do this, as well as retaining your accounting records for the same period. This evidences the business nature of the expenses and therefore the ‘allowability’ for corporation tax purposes.

If you are a VAT-registered business, obtaining a correct VAT receipt is essential, as VAT cannot be claimed unless the company holds a VAT receipt (however, this does exclude specific payments, such as toll payments, which are trivial in nature).

If, for example, it isn’t practicable to obtain a rail receipt, our advice is to pay by company bank card so that there is an audit trail in place or diarise/log your journeys. Doing this supports the fact that the journey took place.

Meanwhile, when you fill up for petrol and claim mileage expenses, the petrol receipt supports the fact that business travel took place and should be retained with your mileage claim.

You should only claim your contractor expenses for the actual costs incurred - claiming mileage expenses, where the actual cost incurred was via rail travel is not acceptable to HM Revenue & Customs. And HMRC specified rates should only be applied to the appropriate method of transport, i.e. car, motorcycle or bicycle. Lastly, remember that keeping the above documentation in place provides safeguards in the event of any interest from HMRC into your company affairs.

The expert was Matt Fryer, head of compliance at contractor accountancy firm Brookson.

Tuesday 19th Jan 2016
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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