If you work as a courier or a multi-drop delivery driver and are employed – which means receiving a regular salary from your employer based on your contract – then you are allowed to claim for expenses. Note that by far the majority of employed drivers will have to make their expenses claim through their employer in accordance with the relevant staff policies. Any fuel that is bought in the course of the working day, for example, will usually be reimbursed by the employer upon presentation of a receipt. However, things aren’t always so simple if you are driving your own van or working as a sub-contracted freelancer.
This is now quite common in the delivery sector which has become one of the most advanced in terms of the gig economy. Indeed, it is not uncommon for drivers to work for three, four or even more courier firms during their working week, typically doing so by accessing jobs through a purpose-built app. Under such circumstances, expenses become part of the cost of running a self-employed business. This is the case even if you work as a self-employed driver and only undertake jobs for just one courier firm. Most self-employed drivers – unless they have a particular arrangement with the firm that is giving them work – will, therefore, need to keep their expense receipts and use them at the end of the tax year. By adding up what you have spent to keep your van on the road, for example, you can make deductions from your income as a driver when you complete your annual self-employment self-assessment.
Needless to say, HMRC does not allow self-employed people – including courier drivers and delivery operatives – to add all expenses they incur to the debit column of their books. Claiming for things that are not allowed could lead to a closer inspection of all your finances by the tax authorities. Indeed, in the worst-case scenario, it could be viewed that you are trying to ‘cook the books’ in order to lower your taxable income, something that could easily be interpreted as fraud. Consequently, many self-employed drivers, including van and bike couriers, are cautious and don’t claim for as many expenses as they are really allowed.
In other cases, self-employed couriers will hand over all of their receipts and bills of sale to an accountant. If so, they tend to charge a reasonably large sum to sort out a year’s worth – or more – of transactions, sorting them into allowable expenses and things that cannot be claimed for. In other words, drivers who work for themselves in the gig economy should be a bit savvier about their tax returns and work out what is an allowable expense and what is not. Read on to find out more about allowable expenses in the courier industry and be better prepared for your next self-assessment return which, for the majority of drivers, will need to be completed before the end of January.
Vehicle Running Costs
Unless you use a bicycle to ferry goods around, the chances are that you will be running a motorised vehicle you own to do your work. Even if you don’t own your own van, for example, and lease one or hire it on daily or weekly terms, you will still have to put fuel in it out of your own pocket. Please note that all of these costs are business expenses that can be directly taken out of your nett profit. Since self-employed people who operate as sole traders are taxed according to how much profit they’ve made in a year – not on how much turnover they’ve generated – being able to remove a significant amount of outlay from these figures will make a big difference to most couriers’ tax bills.
Please note that fuel that is consumed for the purposes of work is allowable. This means, for example, driving to a depot to pick up your deliveries as well as each journey you make on your rounds as a delivery driver. However, if you also drive your van or car for personal use, then you will not be able to claim for the fuel used. In other words, you cannot drive to the shops or go on holiday and claim the fuel you have consumed back as a business expense. Given that some of the receipts you have kept after filling up might include fuel that is used for both business and personal driving, the best way to keep on top of this is to note down your mileage after each day behind the wheel. Keep a record of how many miles you’ve driven for work and what has constituted personal use. Then, you can work out the proportion of each at the end of the year. Let’s say, for example, 20 per cent of your mileage was for personal use. If so, then you would be able to claim for 80 per cent of the total sum of your fuel receipts. Even more importantly, such a claim would be more likely to be accepted by HMRC when your self-assessment is filed.
Remember, too, that there are other running costs associated with vans, cars and motorbikes that you can claim for. Any screenwash you purchase, tyres you replace or oil you fill up with all comes with a cost, of course. Again, use the same proportionality method described above to claim for these running costs since they, too, will have a personal benefit to you that you cannot claim for as well as constituting a legitimate business expense.
Other Vehicle-Related Expenses You Can Claim For
Please note that it isn’t just consumables like oil, diesel, petrol and so on that you can claim for if you own your own vehicle. There are other allowable expenses that apply to owner-drivers. If you hire your van instead, then these expenses won’t apply. However, the rental fee you are charged will be considered as a legitimate business expense so long as you only use the van – or other vehicle – you hire for business use.
Firstly, owner-drivers working as couriers can claim their vehicle repair and servicing costs as an allowed expense. Car owners who use a family car for some of the time as a courier driver may not be able to claim such costs in full, however. That said, van drivers who use their vehicles predominantly for business use are usually able to claim for the full costs involved. If you are unsure what is allowed, then seek expert advice in your case. The same goes for road tax and MOTs. Both of these costs are considered by HMRC to be allowable expenses among self-employed drivers who own their own vehicles. In addition, it is usual for the tax authorities to allow for vehicle insurance to be claimed for, especially when the vehicle is mostly on the road for business purposes. If you have courier insurance or some form of goods in transit insurance designed for self-employed drivers, then this can be claimed for, as well.
Other costs that can be claimed are parking costs and toll fees. Please note that these must constitute a genuine business cost, however. If you have parked somewhere because you are visiting an attraction outside of your work, for example, then your parking receipt won’t be allowed. Nor will any parking fines you have incurred because you have not parked legally during the course of your deliveries. Equally, toll fees you have incurred only through work will be allowed. The receipts for any such fees you have paid must show a date you were working and on a route that makes sense given your deliveries that day.
Claiming for Capital Costs
So far, we have looked at the day-to-day spending that all courier drivers experience whether they’re self-employed or not. However, these examples don’t cover the biggest amount of expenditure that most owner-drivers face which is the capital cost of their vehicle. Whether you own your vehicle outright or have taken out a loan to finance it, the cost of a van or car constitutes a considerable business investment. Therefore, it is possible to deduct some of the capital costs of owning it from your self-assessment return. However, you cannot simply claim for the cost of a whole van, for example, in one tax year. This is because your business – from HMRC’s perspective – will continue to benefit from it for several years to come. Therefore, the rules covering capital costs are different than they are for other business expenses.
Self-employed people from all walks of life – not just delivery drivers – are offered a couple of different accountancy choices for capital expenses in their tax returns. You’ll probably have seen the terms ‘traditional accounting’ or ‘cash basis’ if you have ever completed a self-assessment before. Even if you don’t know what these terms mean, the main point to take on board is that they most closely relate to capital sums spent on a business asset, such as a van, for example.
To be clear, people who use the traditional accounting method in which income and expenses are recorded individually by the date they were billed (rather than settled) are allowed to claim for a vehicle they’ve bought as a capital allowance. So long as the vehicle in question is for business use, as most courier vans would be, then they can deduct a proportion of its value from the profits the business has generated, thereby lowering that year’s tax burden. Under this system, both the van’s carbon emissions and the date it was bought would be used to determine the proportion of capital allowance that can be claimed. People who use cash-basis accounting, on the other hand, are only allowed to claim a vehicle purchase as a capital allowance if they are not also claiming for a mileage allowance for its running costs.