self – employed expenses.

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    Morning all!!

    I have an appeal from a self employed gentlemen (car mechanic not mobile and working from a rented unit) who includes fuel expenses in his accounts. On looking at these I think they are rather on the high side and so I have asked him to explain this. His reasoning for this was that when he receives a vehicle for repair/ service etc there usually isn’t much fuel in it so he has to put fuel in to test drive following repairs etc but he includes this in his cost to the client and so gets it back. Should I allow it as an expense or not?

    I have been given two separate opinions on this and would welcome views from anyone

    Do I know what I'm doing? The jury's out on that........................


    I would have thought yes.

    I am probably missing something because I cannot really see an argument the other way (any chance you could elucidate?)

    He is shelling out for the fuel – all expenses are, ultimately, paid by the customers whether they are included as separate items on an invoice or not.

    Were you not to include them I would have thought you would then have to exclude the charges from the gross income as well.


    First the easy maths bit:

    It is clearly a work expense, but this should of course be balanced by an equal amount of income. If he is getting reimbursed separately by clients and not putting it on their generic bill, the money should be added back in as additional income. On the other hand, far more likely I suppose, if he issues an all-inclusive bill and the whole lot is recorded as generic income then you are counting it as money in on one side and should also allow it as money out on the other.

    But you knew that already and that’s not really what worries you is it?

    Is it true – that’s what we are really talking about here isn’t it? You suspect that he is doing what many self-employed people are suspected of doing, which is to grossly exaggerate an expense that looks OK at first glance, and hope no-one does the sums. Like £1000 a year on “stationery” – they’ll never ask, everyone uses stationery.

    Presumably he puts a small amount of fuel in each car. He should therefore have dozens of receipts for small amounts of fuel. He cannot rely on receipts for £40 worth petrol to fill up a car once every three or four weeks – these must be almost daily, for amounts like a fiver or thereabouts. If he hasn’t got proof of plausible transactions, I might be inclined to disallow the expense.


    Was my suspicion that obvious?!

    He has provided several receipts for amount of £5.00, £10.00 or £15.00 at a time (52 sheets of a scanned and barely readable document!) so I am inclined to meet the expense part way. To be fair most receipts seem to be from one of the garages nearest his unit (My knowledge of the area confirms that) so it could be reasonable. On the other hand, from knowledge of another garage in the area (the proprietor used my own car to do so, as I keep a check on mileage etc. and was therefore NOT paid for the work), the proprietor used cars he was repairing to run around in, collect parts etc and that’s why I have reservations, since my appellant was not using his own vehicle to do so.

    Reasonable to examine accounts and not allow any fuel shown in weeks when no receipts are noted.

    Do I know what I'm doing? The jury's out on that........................


    So I was missing something!

    £15, or even £10 on petrol for a test-drive is seems pretty unreasonable unless there is major work being done or it is a thirsty car.

    I think you are right to only allow in part (unless he is storing fuel on the prems in cans). Must admit it is ages since I have looked at the price of petrol but, say £5.00 per gallon, 25 miles per gallon. £15 equates to a 75mile test-drive! I would assume that the general idea is to return the car with about the same amount of fuel as when it was received?


    Interesting twist here,

    On checking his summaries I find that mathematics is not my claimant’s strong point, Income being underdeclared etc….

    Also no running costs for a vehcle declared.

    Thanks for suggestions and have now decided. As you may guess he ain’t gonna like it!!

    Do I know what I'm doing? The jury's out on that........................

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