ULEZ fees tax deductible for sole traders

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Peninsula Group, HR and Health & Safety Experts

(Last updated )

Sole traders and self employed will be able to claim tax relief on ULEZ charges when they submit annual tax returns for business related journeys

HMRC has confirmed that workers with non-compliant vehicles will be able to claim if their journey was made ‘exclusively for the purposes of trade’. This does not include travel to work or commuting costs.

The new Ultra Low Emission Zone (ULEZ) charge has been extended across all London boroughs from 29 August so that older cars will have to pay a £12.50 daily fee to enter the area with a penalty charge of £180 for failure to pay. The fee is in force 24/7.

Nine in 10 cars driving in outer London on an average day are already compliant with ULEZ standards so their drivers will not have to pay the ULEZ daily charge. However, 20% of vans do not meet the new low pollution levels.

The ULEZ applies to petrol cars first registered before 2006, while diesels registered from September 2015 have to pay the charge.

In a statement HMRC said: ‘Self assessment customers are entitled to tax relief on travel expenses, including low emission zone charges, if they have been exclusively for the purposes of the trade.

‘When a self employed individual claims an allowable expense, the amount is deducted fully from their taxable profits.’

There are concerns that the charge has been rushed through with only a year's notice of the extension.

Matt Jaffa, London spokesperson for the Federation of Small Businesses (FSB), said: ‘This is another cost of doing business. It is very difficult to change your vehicle at short notice during these times and when the zone got extended to the inner London area businesses were given four years’ notice. This time businesses have only been given a year to prepare. 

‘For a lot of small businesses it is going to be difficult. The important thing now is for communication and a soft launch of this policy, not to go heavy handed, businesses not to be fined heavily in the first few months. TFL and the Mayor have to understand this as we are still facing a cost of doing business crisis.’ 

Scrappage scheme

There is a £160m scrappage scheme for drivers with affected vehicles, which is open to small businesses with less than 50 employees, charities and sole traders, as well as individuals, which must be claimed by 29 November 2023. All replacement vehicles must be on the road by 29 May 2024.

All London residents with non-compliant vehicles can apply for £2,000 to scrap a car or £1,000 for a motorcycle. The payment for wheelchair accessible vehicles (WAVs) is £10,000 to scrap the vehicle, or £6,000 to retrofit the WAV to achieve ULEZ standards.

The grant for scrapping a non-compliant van is £7,000 and there is a £9,000 subsidy for purchases of electric vans.

 Small businesses and charities will also receive increased grant payments of between £6,000 and £11,500. Eligible businesses and sole traders will be able to apply for up to three vans or minibuses to be scrapped or retrofitted in total, even if they have already received a grant payment for one vehicle as part of this scheme.

For answers to questions on covering low emissions travel costs for employees, visit BrAInbox today where you can find answers to questions like Do I need to pay the low emissions charge for employees who drive to work?

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