Included in the
2013/14 Revenue & Customs Brief are a new set of optional rules designed to
simplify the expenses for certain parts of a sole trade or unincorporated
partnership. Their aim is to aid small businesses with more efficient methods
to calculate their expenses. The types of businesses that can use the new rules
are:
-
Businesses with vehicles – business mileage
deductions have a new simplified alternative to apportioning the actual costs.
-
Adjustments to businesses such as a small hotel
or B&B who live on the premises of the business.
-
Businesses which use part of their home as an
office.
Whether these new
simplified rules are beneficial to your business can only be assessed on a case
by case basis. The alternative method for calculating expenses may actually be
more suitable to your company.
Business Mileage Deductions
The new rules for
2013/14 business mileage deductions keep the same flat rates as previously:
-
£0.45 per mile for the first 10,000 miles.
-
£0.25 per mile for every mile after.
The main difference
is that they cover all running costs and capital allowances of the vehicle so
there are no further costs. They also now have a statutory effect as opposed to
previous years. It is aimed at smaller businesses with perhaps only one vehicle;
however the flat rate must always be used for that vehicle.
The flat rate doesn’t
have to be used for all the vehicles in the business, the method of
apportioning the actual costs between business and private use can also be
applied. If capital allowances on that particular vehicle have already been
claimed, the flat rate cannot be used.
Board & Lodging Adjustments
This is for businesses that live on the site
of their small hotel, guesthouse or B&B, it is only for such businesses
which the main use is for their trade. The adjustments are a new simplified
version of the agreements between HMRC and the business which were previously
in place.
The new rule
calculates the portion of the running costs which are used in the private part
of the home, and which can therefore be deducted off the total costs to find
the total deductible business expenses. It is based on the number of people who
reside in the private part of the premises (including children):
Number of people
|
Flat rate per
month
|
1
|
£350
|
2
|
£500
|
3+
|
£650
|
The running cost includes all household goods and services,
food and non-alcoholic drinks and utilities. It does not include fixed costs
such as mortgage interest, property insurance or council tax.
Transitional rules
for businesses which used the previous boarding and lodging agreements with
HMRC are as follows:
-
If had an agreement in place for 2012/13 then it
can be used for the 2013/14 tax year, however from 2014/15 it can no longer be
used and the flat rate or actual basis must be used. This is in place to give
time for businesses to consider which method they would now like to employ.
-
No new agreements can be made from 2013/14 as
they are being withdrawn.
Use of Home as Office
The new rule again
creates a flat rate on the basis of hours using the office in the home over the
month, to deduct as expenses. It is a monthly flat rate which covers the
running costs of the home office (heat, light, power, telephone, broadband) but
it does not include the fixed costs (rent/mortgage interest, council tax,
insurance), these need to be apportioned from the private costs of the home.
The flat rate method acts as an alternative to apportioning the total cost of
the home, and apportioning the business element.
The Flat rate amounts
are as follows:
Total hours
using the office
|
Flat rate per
month
|
25 hours +
|
£10
|
51 hours +
|
£18
|
101 hours +
|
£26
|
The office must be wholly and exclusively used for business
purposes in order for it to qualify.
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