Our audience has spoken
Our Chilli Accounting blog has been going for a few months now and we’ve been getting some really good feedback. We’ve tried to share some of our thoughts about how technology is changing the accounting industry. Our focus is to show that small businesses using this technology well, assisted by the right accounting partner, are not only surviving but growing in 2016.
But like any good feedback people have also been telling us where we can improve our blog. And overwhelmingly they have been saying they want more ….. TAX !
Did they have a pair of underpants on their head and a pencil stuck up each nostril when they said this, you might ask? No, I think I know what they’re saying. They’re telling us “you’re accountants so its ok to talk about TAX stuff and we promise not to get bored”.
Ok then, let’s get our TAX on. As Bon Scott from AC/DC said “If you want TAX (You’ve got it)”. Or something like that.
Vehicle expenses can be a pain in the backside
So if we are going to blog about TAX we might as well start with one of the big beasts! Motoring expenses, and what you can and can’t claim as tax deductions, are one of the real pain points for small business owners. It’s a complicated area and the specifics of individual situations are really important. But as we’re time and space restricted in this blog, let’s try something different.
We are going to give you a quick introduction to the simplest way to claim a deduction for motoring expenses utilising the latest cloud technology. The upshot of this is you retain more profit and also get a lot of admin time back.
Let take the fairly common situation of business owners using personal vehicles for business purposes. HMRC have approved mileage rates which you are allowed to deduct against your tax bill. This is 45p per mile (25p after 10,000 miles) with an extra 5p per mile if you have a passenger (who is also an employee of your business). This rate covers all the vehicle running costs, servicing and depreciation. There are also rates for motorcycles at 24p and bicycles 20p respectively.
It is important to remember that the normal daily commute from home to the office is not allowed to be claimed.
So this is certainly the simplest approach and, in a lot of cases, the most tax efficient. However, it does require the maintaining of a detailed mileage log. Ok, so here’s the catch you will be saying. A mileage log sounds like a serious bit of admin. And, in truth, in the past it has been.
However, recently new digital tools have been brought out which have simplified the process massively. One of these which we are recommending our clients use is Tripcatcher. This app (mobile and desktop) allows you to digitally record all your business trips with mileage calculated using Google Maps. The rates always reflect up to date HMRC allowances. You can create favourite journeys and other standardised data to cut down on input time. For those that are VAT registered it also calculates the VAT you can claim on the fuel element. Best of all, it then seamlessly integrates with Xero or Receipt Bank to allow you create a transaction in your accounting software (no more paper records or spreadsheets!).
The convenience factor of apps like Tripcatcher significantly reduce the time it takes to be HMRC compliant and increase the chances of your business being able to claim all the tax and VAT deductions it is entitled to. This is another great example of how technology solutions are making small business accounting so much more convenient and stress free.
Enough TAX for now. More to come at a later date
The solution that we have covered here is only relevant to those business owners using personal cars for business. The alternative situation of vehicles going through as direct business expenses is a story for another day. Watch out for that in a couple of week’s time.
Today we wanted to share a reminder on the mileage claim rules but most importantly give you another example of how technology is making small business owners lives simpler and giving you back more time to focus on business growth or your personal life. And the best thing here is there are plenty of other example of this sort of technology. So if you have any questions or want to discuss the issues here further please leave a comment below or fill in our contact request form.