A new regime of simplified expenses is now available for sole traders and business partnerships has now taken effect.
The Finance Act 2013, which came into effect in July, means that they now have the option of using flat rates for any or all of their expenses relating to:
- business costs for vehicles
- business use of a home
- private use of business premises as a home.
Sole traders and business partnerships are not under any obligation to use the new system but if they decided that it is suits their business, they can start using simplified expenses from the 2013-14 tax year. The regime is not available to limited liability partnerships or limited companies.
Businesses using the simplified expenses system will need to record their business mileage, hours worked at home and/or how many people live at their business premises over the year.
At the end of the tax year, they will then calculate allowable expenses relating to these using flat rates provided by HM Revenue & Customs (HMRC).
HMRC says the benefits of the system means that people using the system won’t, for example, need to keep track of vehicle running and repair costs as well as mileage or work out the proportion of utility bills that are due to their business where they work from home.
If you are unsure of how the new expenses regime will affect you and your business then Milsted Langdon’s tax team can help. For further information, please contact us.