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self employed - fuel costs againt tax ..

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pingu748 | 22:06 Thu 02nd Jun 2011 | Business & Finance
4 Answers
having just returned from an interview, i found out that the position is on a self employed basis .. no problem with that, but I was told that the vehicle is supplied, but i am expected to pay for the fuel .. which, apparently, can be offset against my tax return at the end of the financial year .. i.e if i owe £1500 tax and have spent £1000 on fuel then i only need to pay £500 in tax .. right ? or wrong .. ?


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Let's assume that in the current tax year, you get paid £27,475. Unless you tell the tax man otherwise, he'll assume that every penny of that is profit from your business. So you'll pay tax, at 20%, on £20,000 (because your tax-free personal allowance is £7,475). That's a tax bill of £4,000

If you tell the tax man that you spent £1000 on fuel, that takes your 'profit' down to £26,475, meaning that you'll pay tax, at 20%, on £19,000, which is a tax bill of £3,800.

So the tax man effectively gives you back 20% of your fuel expenditure, not all of it.

Read this before you agree to do this.
This sounds to me like an abuse by the employer, to seek to avoid employer's NI and to avoid giving you employment rights.
Self-employment or employed status is NOT a matter of choice - it is matter of the way the work that you do is delivered and the method by which you are paid.
Work through the series of questions on the second webpage (employed or self-employed) to help you.
I cannot see a route by which, if the company is furnishing you with a vehicle, you are anything but 'employed' in the eyes of HMRC.
The provision of a car in itself, though a good indicator of employment, doesn't mean he couldn't be self employed.

For instance, a person who works 12 hours a week in a commercial sales position may be self employed on a commission basis (and work for other clients in the rest of the week) and provided with a company branded vehicle to visit customers during that period. It wouldn't preclude self-employment per se.
However if you have no other source of income (employer or customers or whatever you want to call them), then the tax man is unlikely to accept your status as self employed. Having said that, if you have to pay for the fuel to do your job, then any fuel you use solely for business purposes should be allowable against tax, even if you are "employed". But you will be taxed on the vehicle.

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