Flat rate deductions for unincorporated businesses

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Flat rate deductions for unincorporated businesses
  • Statutory flat rate deductions
  • Flat mileage rate
  • Use of home for business purposes
  • Premises used as home and for business purposes
  • Planning points

The flat rate deductions discussed in this guidance note are only available to unincorporated businesses.

Statutory flat rate deductions

From 6 April 2013, flat rate deductions are allowed for the following:

  • expenditure on vehicles
  • use of home for business purposes, and
  • private use of business premises

The deduction for expenditure on vehicles is available to unincorporated trading businesses and, from April 2017, unincorporated property businesses. The remaining flat rate deductions are only available to unincorporated trading businesses.

Flat rate deductions can only be claimed by individuals and partnerships made up only of individuals. Partners in a firm that contains a corporate partner cannot claim flat rate deductions.

The deductions apply to professions and vocations as they apply to trades.

ITTOIA 2005, s 94B
Flat mileage rate

The flat mileage rate is an alternative to claiming all the individual costs associated with a car. To calculate the allowable deduction for the vehicle, the number of business miles are multiplied by the mileage rate. This replaces all actual costs and capital allowances.

The rules on vehicle costs are similar to those allowed by HMRC prior to 6 April 2013 on an informal basis.

BIM47701 ― archive copy 

The statutory flat mileage rate is available regardless of turnover. It must be opted into on a vehicle-by-vehicle basis. Once relief has been granted for a vehicle on either the flat rate basis or the actual cost basis, that basis must be used until the vehicle is disposed.

For cars and motorcycles, the mileage rate from ITEPA 2003, s 230 is adopted:

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