Business Motoring – Tax Aspects

This factsheet focuses on the current tax position of business motoring, a core consideration of many businesses. The aim is to provide a clear explanation of the tax deductions available on different types of vehicle expenditure in a variety of business scenarios. Motoring costs, like other costs incurred which are wholly and exclusively for the purposes of the trade are tax deductible but the timing of any relief varies considerably according to the type of expenditure.

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Cars for Employees

The current regime for taxing employer provided cars (commonly referred to as company cars) is intended to encourage manufacturers to produce cars which are more environmentally friendly and to give employee drivers and their employers a tax incentive to choose more fuel-efficient and environmentally friendly vehicles.

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Cash Basis for the Self-Employed

We consider the optional rules which allow small unincorporated businesses to calculate their profits for tax purposes on a cash basis rather than the normal accruals basis. One example which illustrates the difference between the accruals basis and cash basis is that credit sales are included in the accruals basis accounts income despite the fact that the customer may not have paid for the goods or services by the end of the accounting period.

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