Contractors' Questions: Is my drive to a house I’m refurbing claimable?

Contractor’s Question: My complex expenses query stems from me being in full-time employment, but also holding two directorships, one of which is of a ‘Ltd’ that refurbishes property.

I’m not salaried in this director role and do the work in my spare time, but drive about 200 miles each weekend to do the work at a single property. This has taken me around three years to complete. I’m now looking to claim mileage at 45p per mile, but my accountant is unsure whether the refurbishment property is a “workplace” and he considers that as I have only one property, it could be a permanent workplace and therefore no expenses are allowed.

Personally, I'm not even convinced it is a “workplace” but we’re in dispute. The company’s registered address is my home address, but he says it makes no difference. Please advise.

Expert’s Answer: This is an interesting scenario. There are a couple of questions that will need to be answered, in order to give a clearer picture of your eligibility for expenses.

The first one is around ownership of the property in question. Who or what is the property’s legal owner -- you as an individual, the company or some other entity?

The second question is: what is the ultimate objective of refurbishing the property?  Are you looking to sell it on or rent it out as a landlord?

If the property is owned by the company of which you are a director and has been purchased with a view to selling after refurbishment, I doubt you’ll be able to claim mileage. This is because the company has bought an asset with a view to making a capital gain. Mileage for these purposes is unlikely to be an allowable business expense.

If, however, the plan is to rent the property out then you will, in theory, be eligible for tax relief on your mileage expenses. Remember, you can only claim mileage at 45p per mile for the first 10,000 miles. Thereafter, the rate reduces to 25p.

I say above “in theory,” because the big issue to be aware of here is the 24-month rule. This rule means that you could have claimed mileage up to 24 months, or the point at which you became aware that the project would last more than 24 months. If you knew at the outset that the project would take more than 24 months, then at no point would you have been able to claim mileage.

If the property is owned by you as an individual and you are looking to sell after refurbishment, then it’s unlikely you will be able to claim business expenses. Instead, it will probably be one for your self-assessment tax return, where a capital gain will be declared.

Finally, I agree with your accountant on the last point. The fact that your registered business address is your home address is not relevant. Good luck!

The expert was Tauseef Tariq, tax accountant at contractor accounting firm ADVANCE.

Editor’s Note: Related --

Contractors’ Questions: Would being inside IR35 preclude mileage claims?

Contractors’ Questions: How to rent out a property as a ‘Ltd’ contractor?

Contractors’ Questions: Would renting a flat be a justifiable expense?