Freelancers' Questions: How to claim mileage when driving to a client?
What are the rules regarding mileage claims and would these be less onerous if I was a limited company instead of a sole trader? Also, will I need to keep receipts for what is going to be a set of extraordinary long drives, and will the duration of journey affect the claim?
HM Revenue & Customs has set statutory rates that can be claimed for business miles; 45p per mile for the first 10,000 miles in the tax year, and 25p per mile thereafter – these apply irrespective of whether your business is incorporated.
Mileage is intended to cover the cost of fuel as well as insurance, tax, maintenance and depreciation. But there is no requirement to retain supporting receipts unless VAT is being reclaimed on the fuel element.
The length of the journey does not affect your eligibility to claim mileage but may affect the rate that can be claimed in the year, as once you have claimed 10,000 miles the rate that can be claimed for the remainder of the tax year will reduce to 25p per mile.
In summary, your incorporation status will not affect the amount that can be claimed for each journey; however, there are other tax benefits that are associated with adopting this legal structure and some agencies/clients may require it following the enactment of the Onshore Intermediaries Legislation.
The expert was Craig McCall, compliance manager at Nixon Williams.
19th August 2015