Travel Expenses and Subsistence for Self Employed
- by Izabella Lichomska
- •
- 09 Apr, 2022
- •
Travel and Subsistance
Travel Expenses and Subsistence for Self Employed
Travel expenses and Subsistence on the self-assessment return are often challenged by HMRC.
Subsistence is related to business travel – so if your travel is qualified as business, you can claim reasonable subsistence expenses.
Many Self-employed would claim all travel without fully understanding what rules need to be applied for this to be qualified as business expenses.
Using your car – claiming Mileage or business portion of actuals costs
So, what to take into consideration when calculating, and making the classification between Business and Personal travel:
“Base of operation” - Place where you are keeping paperwork and contacting clients, keeping tools etc.
"itinerant" – when someone’s job can’t be performed from home which is the “base of Operation” – then all travel to customers from Home to clients would be allowable unless there is a Normal habitual pattern – which basically means there is no clear pattern during the extensive time.
If your home is not the base of your operation you can’t claim expenses for a trip from your home to the base of operation.
So, when you can claim and when not examples:
Example Hairdresser
You can claim if you are:
Mobile hairdressers visiting different clients from Based of operation (usually your home) to clients
You can’t claim
If you have a chair in salon and you are there every Tuesday, you can’t claim for a trip between home and the salon as it is the normal habitual pattern.
Example Carpenter/Electrician/other Construction Workers
You can claim if you are:
Working for many clients at the time at a different locations and on different days – example of Carpenter who builds bespoke furniture for different private customers
You can’t claim if you are:
Based on one building site and your pattern and location are known and stay the same (normal pattern)
If you want to answer two questions is your journey is allowed expenses, ask yourself a question:
Does business conduct at one location makes it the “base of operation”?
If travel can be viewed as regular and predictable?
If you answer yes to any of these questions it's likely this would not be the allowable expense.
How you can claim your expenses for travel (car/van/motorcycles)
You can choose to use a Flat rate/simplified expenses:
Where you are recording your business mileage and expense are calculated by multiplying the number of miles by current HMRC rates (Simplified expenses if you're self-employed: Vehicles - GOV.UK (www.gov.uk))
Total number of miles during a year
Flat rate up to 10000 miles 45p
Flat rate After 10000 miles 25p
Total Expenses claimable
Car/Van
15000
10000*£0.45=£4500
5000*£0.25=£1250
5750
(Motorcycle current rate is 24p – not depending on the number of business miles travelled)
Or you can get actual costs: petrol/diesel, insurance/tax, repairs, service, parts MOR, Recovery
But only the proportion of these costs relating to business use can be treated as business expenses
So, you still need to keep a record of mileage to calculate the value of these expenses. Under the actual method, you can claim capital ALLOWANCES.
With costs of petrol/diesel at an all-time high. It is worth exploring both options.
Do you have additional questions? email us: Contact@izzyacs.co.uk
Useful Links
Other travel expenses you can claim against your income:
Any business related
Parking
Hire charges
Train bus air and taxi fares
HMRC Links
Expenses if you're self-employed: Car, van and travel expenses - GOV.UK (www.gov.uk)
BIM37620 - Business Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)
BIM37670 - Business Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)
BIM37660 - Business Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)
BIM47705 - Business Income Manual - HMRC internal manual - GOV.UK (www.gov.uk)
In a significant initiative aimed at fortifying tax compliance within the rapidly expanding digital marketplace, HM Revenue & Customs (HMRC) has unveiled a set of new tax reporting rules that will impact individuals and businesses involved in online selling activities. Effective from January 1, 2024, sellers utilizing platforms such as Vinted, eBay, and Airbnb will be subject to heightened scrutiny, with digital platforms now mandated to collect and share comprehensive information about their users' earnings.
Scope of the Regulatory Changes
The newly introduced rules necessitate digital platforms to gather detailed information from sellers, encompassing their name, address, date of birth, national insurance number, and specifics regarding their earnings and platform fees. For sellers renting out properties, the address of the property will also be mandatory. This data compilation will be shared with HMRC to bolster tax compliance.
Importantly, the sharing of information extends beyond UK-based platforms. Websites operating in countries adhering to the rules outlined by the Organisation for Economic Co-operation and Development (OECD) are obligated to collect and share data on UK-resident sellers. This global approach implies that individuals letting holiday homes abroad through non-UK platforms may have their data transmitted to UK tax authorities.
Implications for Sellers and Platforms
Sellers who have diligently reported their earnings and met tax obligations may experience minimal disruption to their routines. Conversely, those who have neglected to disclose their income may now find themselves under the scrutiny of HMRC, potentially leading to significant tax liabilities and fines.
The shared information empowers HMRC to cross-reference data from online platforms with individuals' tax returns or identify instances where returns have not been filed. Digital platforms are expected to furnish sellers with copies of the submitted information to assist in the accurate completion of tax returns.
Considerations for Sellers
Individuals involved in occasional selling with earnings up to £1,000 benefit from the trading allowance, allowing them to earn this amount without incurring taxes. However, those surpassing this threshold must complete a tax return, irrespective of whether tax is owed.
Sellers trading above £1,000 without filing tax returns may receive notifications from HMRC to rectify their affairs. Non-compliance could lead to voluntary disclosures or, in severe cases, audits and criminal prosecutions.
Digital platforms such as Vinted, eBay, and Airbnb are actively preparing to implement these changes, intending to communicate with sellers about the necessary steps for compliance.
Navigating the Evolving Tax Landscape
The introduction of these regulations underscores the swift evolution of the gig economy and the challenges tax authorities face in adapting. Given the global nature of online transactions, collaborative efforts are crucial to ensuring fair taxation, preventing potential illicit activities, and mitigating tax evasion. As the digital landscape continues to transform, tax regulations are adapting to create a more just and transparent environment for both sellers and tax authorities.
