Travel expenses checklist for freelance contractors

Regardless of its mode, travel is one of the most common expenses for which contractors working for themselves may claim a deduction for, writes Paul Spindler, a partner in the technology group at chartered accountancy firm Kingston Smith. Precisely what you can claim, in terms of an amount, and the record keeping requirements (that freelance/sole trader/self-employed individuals should follow where they intend to claim a deduction for an expense), are as follows:

Travel and Motoring Expenses

Travel expenses are only allowed in relation to business journeys. This does not include the cost incurred in relation to your ordinary commute from home to your ordinary workplace.

Travel expenses may be incurred in a number of forms, the most common of which are: 

Car mileage

Where you use your car for making business journeys, you can deduct the cost in relation to business purposes. There are two ways of working out how much you can deduct:

• a fixed rate for each mile travelled on business, using the fixed mileage rates; or
• the actual expenses, worked out using detailed records of business and private mileage to apportion your recorded expenditure

The current fixed mileage rates are 45p per mile for the first 10,000 business miles you do in your car each year, and then 25p per mile after that. This mileage includes travelling to and from temporary locations and between different sites. You will need to keep a log of your journeys.

If the mileage rate is used, you may not claim a separate deduction for costs of running and servicing the vehicle such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. You would also not be permitted to claim a deduction for capital allowances.

Example:

If you incurred £100 expenditure on petrol which was used to travel 800 miles in total, of which 500 were business miles, you could claim using the fixed mileage rates £225 (45p x 500 miles), OR alternatively claim the business proportion of the actual expenditure being £62.50 (£100 x 500miles/800miles).

Car hire

Where you use a hire car for business travel the costs allowed in relation to car hire will depend on a number of factors including:

• Whether the car is on a short term hire (<45 consecutive days);
• Date hire contract entered into for long term contracts;
• CO2 emission of the car.

For short term car hire i.e. cars hired for less than 45 days consecutively, the full cost is deductible.

For long term car hire for contracts entered into after 1 March 2009 where the CO2 emission is more than 160g/km, only 85% of the hire charge cost is deductible.

Example:

If the hire costs of a long term contract for a car with CO2 of 190g/km was £5,000, you would only be eligible to deduct £4,250 (£5,000 x 85%) from your business income.

Original receipts must be provided. Speeding, parking or clamping penalties/fines cannot be claimed.

The maximum car hire period allowed is 6 months and this must be covered by your contract.

Car parking charges

Parking can be claimed as long as an original receipt detailing date and cost is available for each date claimed.

Rail, bus, taxi and air travel

Fare costs to and from your home and temporary place of work can be claimed where receipts are provided. For low cost flights, both original tickets and online receipts are acceptable.

Associated travel costs

Road, bridge/tunnel tolls and congestion charges incurred while on business may be claimed.

However original receipts are required for all items except toll fees.

Further reading: Tax deductible expenses for IT contractors