Income Tax (Trading and Other Income) Act 2005 section 94D

Expenditure on vehicles

Section 94D sets out the circumstances in which a trader may claim a fixed rate mileage deduction for vehicle expenditure instead of deducting actual costs, and what happens once that choice is made.

• Where a deduction would normally be allowable (including capital expenditure) for a car, motorcycle or goods vehicle used in a trade and not excluded under section 94E, the trader may instead claim a fixed rate deduction based on mileage.
• Once a fixed rate deduction is claimed for a vehicle, no other deduction — whether revenue or capital allowances — may be claimed for qualifying expenditure on that vehicle in any period, and the fixed rate basis must continue for as long as the vehicle is used in the trade.
• Qualifying expenditure covers all costs of acquiring, owning, hiring, leasing or using the vehicle, but does not include incidental expenses connected with a particular journey (such as tolls or parking fees), which may still be deducted separately.
• The amount of the fixed rate deduction for each period is the "appropriate mileage amount" calculated under section 94F, and capital allowances on the vehicle are blocked by section 38ZA of the Capital Allowances Act 2001.