Below are the most common questions we have been asked regarding tax and accountancy. If you cannot find the answer you are looking for, please click here to contact us directly.

This is the faq section for Driving Instructors

• I have just passed my training and started to give lessons. What expenses can I claim against my tax?

  There are many expenses that can be claimed against taxable income. Everyone runs their business in a different way and they will usually incur some expenditure that is particular to them.

  The following list is not exhaustive but gives an indication of the general expenses that can be claimed by a driving instructor:

  • Motor running costs
  • Parking and tolls
  • Car cleaning
  • Franchise fee
  • Postage & stationary
  • Computer consumables
  • Continuing professional education (not initial training costs*)
  • Internet
  • Professional Subscriptions (i.e. MSA, DIA, AIM)
  • Advertising/Website
  • Bank charges on a business account
  • Telephone/mobile phone charges
  • Accountancy charges

  If you have expenses that are not on this list you may still be able to claim them. Keep a full record of ALL expenses and discuss them with your accountant. They may be tax deductible

  *Unfortunately the pre-trading training costs to become a driving instructor cannot be claimed against your tax. If you undertake your Part 3 test or you undertake additional training for example, AIM, then providing you are trading you can make a claim. 

  You can make a claim for your instructor licence even if it was purchased prior to starting to trade.

• I have just bought some new clothes for work. Can I put this cost through my accounts?

  Possibly. If your clothing is protective or, as is more likely in the case of a driving instructor, has a business logo embroidered on it, the cost of buying these items could be claimed. Also, cleaning costs may be shown in the accounts. The clothing is clearly identifiable as work wear, and is "wholly and exclusively" used for the business. You would not wear it other than for work. However if you bought ordinary, everyday clothing from, say, M & S the answer is "No". Under current legislation these items are regarded as having a dual purpose. You could wear them outside of work. They would therefore not be classed as tax-deductible expenses.

• I have recently been undergoing a course of physiotherapy on a bad back. Without this treatment I would not be able to work. Can I include these costs in my accounts?

  Unfortunately, the answer is definitely not. This is based on the test case - Prince v Mapp [1969], in which a professional guitar player (who also played it as a hobby) cut his finger. The injury did not heal and in order to resume his career he underwent surgery. Unfortunately the judge in the case found there was some "duality of purpose" to the surgery - it would allow him to also resume playing his guitar as a hobby - and thus the cost did not satisfy the "wholly and exclusively" test. It would be very difficult to satisfy the 'wholly and exclusively' test even if your vehicle was used 100% for business purposes. You would gain some personal benefit when travelling in any vehicle, an argument HMRC would most likely pursue. As always you should discuss such items with your accountant.

• I am worried that my bookkeeping records would not stand up to a tax enquiry. What records should I be keeping?

  You should keep comprehensive records with supporting receipts. Anyone who has undergone a tax enquiry will know that HMRC can spend months looking through your records asking probing questions about your business affairs. This can be both time consuming, stressful and very expensive, not just in terms of tax but in terms of lost lessons due to the time spent dealing with the enquiry.
  
  It is recommended to have a separate business bank account. If a credit card is preferable, then again, separating business and personal purchases into two separate cards is necessary to avoid queries into personal transactions.

  There are three general forms of transaction to record:

  • Bank transactions, including payments from and deposits into the bank. 
  • Cash payments and receipts 
  • Credit card payments 

  When deciding on how to record these transactions provision should be made to identify which receipts / payments are cash, bank or credit card. 

  For cash receipts, it is important to identify any cash not deposited into the bank but used for sundry cash expenses or general living expenses.
  
  Personal drawings from the business should also be easily identified. One area HMRC looks at is funding of personal expenses. If you have separate business and private accounts, either make transfers between accounts or write yourself a cheque from the business account.

  Mileage records are also important. Even if you use your car almost exclusively for business some form of record should be kept to validate this. HMRC are keen to challenge business mileage where records are not complete. Given that a high proportion of your mileage will be business related, one method is to record your car's total mileage at the start of your accounting year and only record your private journeys made during the year. At the end of the accounting year, work out the total mileage and deduct the private mileage. The difference is your business miles. If you do not have sufficient evidence to support your business expenses then an enquiry can mean an increased tax bill.
  
  HMRC may also make similar adjustments to the previous years tax bills, adding interest charges and imposing penalties. Please also bear in mind that bookkeeping records and supporting receipts should be retained for 5 years and 9 months after being submitted to HMRC.

• What is the best way to finance a new car?

  Specifically for Driving Instructors

  Driving School cars can be treated as plant & machinery and 100% Annual Investment Allowance claimed thereon. However, should you sell/part exchange the car in the future, any proceeds/part exchange value is treated as income and you will be taxed on the amount received.

  Alternatively, the vehicle can be treated as a normal car and with regards to purchasing there is not one best option, as each will depend on your own financial circumstances.

  For example If you purchase a car with your own funds this can be brought into the accounts and an allowance of currently 10 or 20 percent claimed against the value of the car. The percentage is determined by the CO2 emissions of the vehicle.

  Alternatively if you decide to take out a loan to finance the purchase you can still claim the same allowance, plus also claim tax relief on the interest charged on the loan. Unfortunately you can’t claim the monthly loan repayments as an expense.

  If you lease the car then you can claim the lease payments in the accounts but not the allowances mentioned previously, as you do not have ownership of the car. There may also be a further reduction of 15% on your expense claim if the CO2 emissions are above 160g/km.

  For all of the above options there will also be a further adjustment in the accounts for any personal use of the vehicle.

  If you are unsure and would like further advice please click here to contact us directly.