Actual Cost Method Or Standard Mileage Method

[Louise07]

Hi all, my husband pays child maintenance through the Child Support Agency. He has recently become self employed and after 13 weeks of trading they want to see his accounts. The problem is with his business expenses in terms of his van. We don't know which method will be best to use (as per subject title). For a tradesman, is one of the methods generally better than the other? Any help would be appreciated. Thanks

[bednobs]

Sorry i don't know the answer, but wouldn't it depend on how much it actually costs to run his work vehicle?

[Louise07]

Hi Bednobs, HMRC recommend trading for a year and then deciding which method works out best but as CSA want some figures in 13 weeks I just wondered if there was an easy way of knowing. Perhaps we should look at his mileage and actual cost at the end of 13 weeks and see how it's looking. Thanks anyway!

[buildersmate]

As you will know, the HMRC rates are currently 45p per mile for the first 10k miles then 25p per mile after that. That's the easy bit, that calculates the std mileage rate.

The other bit is going to depend on what sort and how modern a van he runs. So if he runs a new van and gets it serviced down at the franchised dealer and changes it every 3 years (and I know trademen who like to do that and I'm not knocking it) it is going to cost him (I reckon) more than the equivalent rate that the grey suits in HMRC worked out - so I'd be using estimates to quote at the CSA.

However if he runs a perfectly serviceable but 2nd hand van he bought at auction, gets a local mate to service it regularly and keeps it till it falls flat then changes it, then he's far better working on the 45p / 25p rate.

[Louise07]

thank you builders mate, its a reliable 55 plate van, he knows the history of it as he drove it for a long while for the company he used to be employed with, he will get it serviced at a local garage etc. your help gives me more of an idea

[buildersmate]

Then he knows what the annual fixed costs are - tax, insurance, normal servicing. I would assume it depreciates to zero over another 5 years if it is 7 years old now. Work that out as an annual cost and divide it by his annual business mileage. Add on (say) 25p per mile for diesel - it may be more than 25p he actually spends. That way you can compare.

CSA should be OK with reasonable and realistic assumptions.

I'll bet on a van like that he's better off using the 45p then 25p rate which will work out to be a more costly expenditure.