R Stride & Co
Driving Instructor Manual
VAT and the driving Instructor ii
National Insurance Matters iii
Tax (How, when, where, how much?) v
Tax Investigations viii
Profit Improvement xi
R Stride & Co xviii
Other Items xxii
Business bank accounts
Talking to the parents
Cutting overheads
Reducing tax liabilities
Definition of business and private mileage
Broadband and Home phone costs
Missing Receipts
Claiming for Use of Home
Claiming for home computers
What can’t be claimed for xxvii
List of common claimable and non claimable items xxviii
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- ii - ii
General information relating to VAT, Tax and National Insurance
VAT
Under current law the vat threshold for businesses registering for vat is £83,000 (5th
April 2016 to 6th
April 2017) per annum of income. This means that 99% of all
individuals who commence in the driving instructing industry are under this threshold
and therefore do not need to be vat registered.
If you have other businesses as well as driving instruction or plan to take on a second
driver to help out your business, please contact us direct.
The only impact is that when you collect fuel invoices from the petrol station please
ask for a VAT invoice. The card payment slip you are given does not need to be kept.
In fact we advise that this is not kept as having two receipts sometimes confuses the
issue.
Important
When at the petrol station collect a vat invoice. We do not need the credit card slip
keeping
The reason we ask for a VAT receipt is that the voucher identifies what goods and
services you have purchased. The Inland Revenue will question non VAT receipts in
the event of an investigation if the fuel consumption does not relate to their
“standards”
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- iii - iii
National Insurance
There are currently four classes of National Insurance
1. Class 1 NIC (National Insurance Contributions)
This is national insurance that employees pay when receiving their pay
from their job. Most individuals coming from jobs to self employment
will have paid this in the past. The rate is currently 12% of your gross
salary.
2. Class 2 NIC
Commonly known as “The Stamp”. This is currently £2.85 per week
(£2.80 up to 5th
April 2017)
Class 2 NIC historically has been collected via Direct Debit, but this has
changed. The whole years Class 2 NIC will be added to your year end tax
liability when I produce your tax return (52 x £2.80 = £145.60 for 2016-
2017 or £148.20 for 2017-2018)
3. Class 3 NIC
This is a voluntary national insurance for people who do not pay NIC and
wish to pay. If you feel you are in this category, please contact us. Most
driving instructors will not be required to pay this.
4. Class 4 NIC
This national insurance relates to the self employed (you !)
As you can imagine with most of the employed world paying 12% of their
income with you paying £2.85 per week the Inland Revenue are not going
to let you get away with so little National Insurance !
Therefore there is a “top up” national insurance to pay depending on your
business profits.
The rate is currently 9% of profits. I will refer to what defines profits later.
It is paid at the same time as your tax bill (see next section for dates) and
when discussing “tax payable” with our clients we always include this
figure but do not refer to it.
Therefore as far as you are concerned I will not refer to this tax charge
again.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- iv - iv
Other important National Insurance Facts
Duplicated national Insurance numbers
There have been a number of cases where duplicated national insurance
numbers have been identified. In order that your state pension is protected
and worked out correctly, I suggest that you contact the National Insurance
Department – State pensions on 0845 3000 168. This will determine if
your state pension is on forecast. We will talk later about retirement
planning.
Important
Make sure that you are up to date for class 2 NIC. By not doing so you
could negate any benefits
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- v - v
Tax
The current tax rate is 20% of net profits after allowances for personal allowance for
2017/2018 at £11,500 per annum.
If you have other income e.g. pension income or other jobs in addition to driving
instruction your affairs are more complicated and therefore please contact me direct
for direct for specific advice relating to you. The rest of this section relates to a
driving instructor with no other income.
Example of what is taxable income :-
Per annum
Turnover (driving instruction income) 25,000
Franchise Fees 8,000
Petrol and Derv 3,000
Other expenses (mobile etc etc) 1,000 12,000
Profit 13,000
Wages (Drawings) transferred to private account 12,000
Cash left in bank at end of year 1,000
In the above example the Profit (£13,000) is the figure that you are going to be taxed
at 20% plus 9% (Class 4 NIC). A total of 29% subject to annual personal allowance.
How much do I save for tax ?
Most of our instructors always ask us what should they be saving towards their tax
bill. As the calculation to work this out is extremely complicated, we have come up
with a simple formula.
Takings multiplied by 15% = tax needed to save.
For example If you go out on Monday and Tuesday and have 6 lessons at £20 and also
collect 2 lots of £56, you should have £232 in cash/cheque. Bank this money as
normal in your business bank account an then with cleared funds transfer 15% £34.80
to a savings account
Hint
Save 15% of your daily takings and tax will never be a problem again !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- vi - vi
Any Savings Account ?
I suggest that if you have not used your ISA allowance then ask your bank or building
society to open an ISA for your tax saving. There are some good ISA accounts
around at the moment and with the low interest rates not having to pay 20% tax on
any interest received makes them more attractive.
When will I pay my first tax bill ?
If you have commenced business after 6th
April 2017 and before 5th
April 2018 your
first tax bill will become payable on 31st January 2019.
However please be warned that the second year of your business to 5th
April 2019 will
not become payable on 31st January 2020, but in two instalments on 31
st January 2019
and 31st July 2019.
See below
Tax Year Goes on Tax To be with Tax Payable Tax
Ended Return issued Revenue Paid
5th
April 2018 5th
April 2018 31st January 2019 31
st January 2019 Full
5th
April 2019 5th
April 2019 31st January 2020 31
st January 2019 Half
31st July 2019 Half
31st January 2020 Bal
5th
April 2020 5th
April 2020 31st January 2021 31
st January 2020 Half
31st July 2020 Half
31st January 2021 Bal
The Half payments are based upon the previous year with the balance (assuming
profits go up) the following January.
As you can see the tax payable for year 2 and 3 is paid before the year end of 5th
April
and is therefore estimated based upon the previous year. The system is quite complex
and therefore we recommend that accounts are provided to us as soon as the year end
passes so we can work out and forecast your tax. In the meantime keep saving 15%.
If you have been in self employed prior to 6th
April 2017 I shall be contacting and
talking with you about your prior tax affairs and discuss with you this separately.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- vii - vii
Summary
We provide at least a years warning with accurate tax payment for all our clients. In
some cases we are now providing accurate tax figures for January and July 2019 for
some clients !!! This would certainly be informative for you !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- viii - viii
Tax Investigation Issues
There are various ways that the Inland Revenue could start a tax investigation.
Some ways are outside your control, for example a random enquiry.
However most enquiries are started for a specific reason relating to your affairs.
The most important way you can help towards reducing this risk is have an accountant
who knows the business who will pre-empt and give advice on avoiding
investigations or at the last resort report in the “white space” on your tax return items
which vary from the “normal set of accounts” for a driving instructor.
Most accountants do not mention or talk to clients about avoiding tax investigations
and most either ask you to take out investigations insurance to cover their fees should
an investigation commence, or worse still just ignore it (billing you at a later stage
large fees)
• “White Space” is an area on your tax return where you can give explanations.
There is plenty of white space on your tax return. See page 6 of the self
employed pages
As part of our service we are heavily involved in trying to avoid our clients having
investigations and as a result our investigations has been reduced to Zero in current
clients over the past couple of years. Most accountants could expect between 20 or 30
aspects or full enquiries per year ! The only investigations we get are from clients
joining us with previous history !
The overall problem with tax investigations is that the client does not understand what
regulations they need to stay within. We provide all clients detailed guidance on tax
investigations which helps them keep within the guidelines.
There are various ways we and more importantly you can stop a tax investigation.
We teach you these simple tips, no other accountant in the country even attempts to
discuss “anti-tax investigations”
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- ix - ix
There are also factors that you might not have even considered… take the following
scenario…
A Tax Investigation is taking place and the revenue are convinced that your lifestyle
exceeds your income declared on your tax return. They have at the initial meeting
asked about your personal lifestyle
Your books and records appear accurate (you have followed our book keeping
suggestions) but they are looking for cash withdrawn for personal expenses (e.g. that
Chinese on a Friday night)
You normally take personal cash from your private (or joint with spouse or partners)
account for personal expenditure, but on one occasion your wife or partner goes to
Tesco’s for the weekly shop and at the till requests “cash back”
This cash back will not be shown anywhere as Tesco’s just record the transaction as a
food purchase. The only mention is on the till receipt they give you. Have you (or
your partner) kept these till receipts to prove the withdrawal of cash?
A tax investigation could take place up to three or four years after this event and for
you to remember why cash does not seem apparent that week could be in favour of
the Revenue.
They would just conclude that no cash has been taken from the bank and therefore
they feel you have taken cash as income and not recorded it !
Important
In summary a personal event could jeopardise your tax investigation !!!
Summary
We have an in-depth “Anti-Tax Investigation” policy in place. We shall start to look
at tax investigation matters in more detail in “pack 2”
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- x - x
Personal Mileage and Fuel consumption issues
One of the largest discussions at any tax investigation meeting is the use of the car for
personal use and also the fuel consumption.
If consumption is high for any reason e.g. large geographical area, automatic vehicle,
reduced lesson prices e.g. 5 lessons for £76 then the return could be picked up for
further enquiry.
We have previously mentioned “white space” to explain these discrepancies but care
with the following will help any future investigation.
Personal Mileage
Please ensure that you follow our personal mileage recording recommendations in our
book keeping manual. Simple records will serf ice, you do not need to record mileage
every time you get in the car.
Fuel consumption objectives
Although fuel consumption varies to takings depending on a huge number of factors
(consult us for further advice) the average driving instructor should be aiming for
around 12.5% fuel costs to takings
e.g. Takings of £500.00 x 13% = £65.00 fuel
The 13% is obviously based upon a number of factors e.g. location (rural/urban),
postcodes covered, type of driving etc etc Talk to us about your situation.
Please note that the recent increase in fuel costs at the pump the 13% is based upon
£1.10 per litre. For every 10p increase in the pump cost increase the percentage by
1.1% (rough guide)
Does your accountant discuss fuel consumption percentages with you, and does he
know what it should be for you ?
If the latter is not done, how can he comment on the tax return in the “white space” if
there is a problem
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xi - xi
Profit Improvements and Your Business
There are ways of making money and profit and there are ways of maximising income
and profit.
I have spoken at a number of Driving Instructor Meetings who once I have discussed
the following and other methods driving Instructors who have been trading for years
did not realise the implications, and gone away and increased income by up to 40% !
Making money by cutting overheads and ways of reducing tax liabilities are discussed
later but first lets concentrate on maximising income and profit….
General Overview
As a driving Instructor there is a possibility to increase takings by 20% to 40% and
decrease fuel usage by up to 30%.
In order to do this we must look at the pattern of how the daily work load is
performed.
Increase in takings
On a normal day (sample from 9am to going home by 5pm) with 1 hour lessons with
½ hour gap in between the daily takings are as follows:-
9 10 11 12 1 2 3 4
� £20 � � £20 � �£20� �£20� �£20�
Making a total of £100 for a normal day
If we increase this to a 2 hour lesson the following happens
9 10 11 12 1 2 3 4
� £40 � � £40 � � £40 �
Making a total of £120 for the same period
Making an increase in income of 20% for working no more hours. If a longer day is
worked then this can increase to 40%
Gone are the days of working silly hours, with this method you can reduce the
number of hours you work but still receive more income !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xii - xii
Decrease in Fuel Costs
We have already previously mentioned that the objective is to achieve less than 12.5%
of fuel consumption to Turnover.
There are a number of factors which could show a larger percentage figure than this,
namely increased private use, vehicle inefficiency, geographical area, lesson planning.
Remember 1% saving will result in a £300 extra cash in your bank account at the end
of the year. We have come across instructors with a 18% fuel consumption usage..
That’s around £1,650 of extra fuel a year…!!!
In general the more gaps between pupils the more fuel will be used. In our research
by implementing the above improvements and also increasing to 2 hour lessons a 30%
decrease in fuel consumption can be achieved.
Lets look at how to save fuel consumption in further detail
Private Use
Obviously the more private usage of the vehicle the amount of fuel increases and
therefore the overall fuel consumption increases. Apart from using another vehicle
this area can not be improved upon.
If you do use the vehicle for private use, please ensure that all your fuel is purchased
and recorded in the business records even if you take a long trip and fill up a couple of
times. Just record the fuel as normal in your book keeping book and also record
private mileage as normal.
When we analyse your fuel consumption at the year end we will provide two fuel
consumption figures, with and without private usage. These will be discussed in
further detail when we prepare your first accounts.
Vehicle in-efficiency
This is a little considered area, but never less a huge consideration. There are a
couple of main considerations:-
• Make sure that all service intervals of the car are stuck to. On a number of
occasions we find that cars are not serviced properly and this leads to
inefficiency
• I recommend that even with new cars being able to go 12,000 miles without
services that simple oil changes are performed every 6,000 miles. Amazing
the difference this makes to performance.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xiii - xiii
• Ensure that tyre pressures are correct. This is a simple one… get your pupils
to test the pressures.. Its good practice. Make sure these are tested on a
weekly basis.
• Try to keep sun-roofs and windows closed. Opening of these does make a
huge difference to fuel consumption
• Finally, don’t forget to teach your pupils driving efficient techniques. Going
beyond what is needed to get your pupils to pass the test will make you more
professional and become the best. This will be noted by your pupils and of
course this leads to further recommendations !
Geographical Area
This is the major player in fuel consumption. This can be split into two defined areas.
Home geographical area
Obviously there is nothing we can do with regard to the location of your house and
the location of your pupils. As you can probably realise if you live in the heart of
Birmingham near to the Bull Ring Centre and your pupils all live within 10 miles then
the fuel consumption will be far less than someone who lives in Wales and would
therefore need to travel from his/her village to the nearby town (e.g. Swansea)
Our computerised database system has an automatic link to google maps and when we
prepare and consider your fuel consumption during the preparation of your tax return,
this is considered. We then explain to the Revenue location details in the “white
space”. Simply noting this on the return could stop a tax investigation before it even
starts !
Location of Pupils
This is one area that all driving instructors can change. Please ensure that you keep
all pupils in certain areas (e.g. west of the town in which you live) on the same day
apart from pupils who live in other areas (east of the town)
This can simply be done by giving restricted choice….
Don’t ask “When would you like your lesson next week ?”
Always say “When would you like your lesson next week on Monday or Tuesday ?”
If you give a restricted choice to pupils and arrange all pupils in areas on the same
days, this will drastically reduce your mileage and therefore fuel consumption.
In our tests pupils will choose random days if left to their own choice, but will pick
your restricted choices 95% of the time if given the option !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xiv - xiv
Test your fuel usage !
Fill your vehicle up to the top on Monday morning first thing, then undertake a series
of lessons. Try to make sure that there are no discounted lessons e.g. 5 for £56.00
After a couple of days lets say you have done 10 lessons at £25.95, a total of £259.50
income (assuming £25.95 per hour) then fill the car up to the top again.
Multiply your total income by 13% ** (£259.50 x 13% = £33.74) . If the fuel used is
less than this amount you are on track, if your fuel cost is higher than £33.74 then you
are using too much fuel. See in the section above on what can be done.
** see notes above on increasing percentage due to increased fuel costs at the petrol
station.
Two Hour Lessons
Obviously there is a greater need to make sure all your pupils start and continue on
two hour lessons, as this could make a massive impact on your income and
expenditure and could make as much as £6,000 per annum in your bank account at the
end of the year.
From a pupil point of view there are also great advantages (see later), but from
practice pupils give any number of excuses why they can not afford a £51.90 double
lesson.
Firstly we have to convince pupils to take two hour lessons…
Trying to explain the reasons just complicates matters, and therefore we have
designed a flowchart (a laminated version is included in your starter pack) and keep in
the car for this use.
Don’t try to explain the theory, show your pupil. People understand better when
presented in graphical terms rather than just explained.
Hint
The parents normally pay for lessons. When picking up the pupil for the first time go
and introduce yourself to the parents and show them ! Don’t forget they maybe
coming to you as you are discounting the first few lessons (e.g. 5 for £76) and then
plan to move on. You could stop this scenario from lesson one, just by introducing
yourself and showing them your techniques !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xv - xv
There are two flowcharts….. (see appendix’s)
The first shows how the pupil gets 25% extra driving tuition for doing two hour
lessons rather than one hour lessons.
If they are not convinced at that then the reverse side of the flowchart shows an even
greater percentage taking into account recap and progression time.
Overall benefits for the pupil
With a 35% increase in learning skills the pupil will be ready for the test in a faster
time, with faster past rate, recommendations will go through the roof, as your pupils
will be passing your name to others. This all leads to a steady increase in business
over the first couple of crucial years.
“Use my driving instructor he only took 13 weeks and I passed my test not 40 weeks
that you took ! Did you know 2 hour driving lessons make you a better chance of
passing your test”
[average time to pass a test using 40 one hour lessons less 35% = 26 weeks or 13
weeks at 2 hour lessons]
If the above does not convince them after all who would want to pay £1038 to pass a
driving test when £674.70 would do !!!
[40 hours at £25.95 = £1038.00 compared with 13 two hour lessons (13 x £51.90) =
£674.70]
Also consider the actual driving test, when are the most test failures. How many
times have you heard the following:-
“I was doing fine, just 5 minutes back to the test centre and I did a silly error at the
last roundabout !”
Most test failures are in the last 15 minutes of the test… why is this ? Basically most
pupils who do this only have taken 1 hour lessons !
If all their driving experience they have driven for an hour and then suddenly test day
is two hours…. ½ hour to get there and 40+ minutes for the test, they are beyond their
1 hour comfort zone.. they have never driven that long before… no wonder they make
silly mistakes
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xvi - xvi
Important
Does your pupil want to increase their chances of passing their test… If the answer is
“yes” inform them that two hour lessons are a must !
Problems with two hour lessons
Affordability
The standard problem is affordability… £51.90 a week compared with £25.95 a week.
If cash flow is an issue, don’t forget you can always suggest lessons every two weeks
instead ! Yes we realise that the recap time will increase and the progression time
will decrease but the pupil will still be overall still be better off.
Hint
If £51.90 a week is a problem, get your pupils to have a two hour lesson every two
weeks instead
Concentration
We realise that this can be a major impact on your decision to take longer lessons.
Come pupils will deteriorate in the latter half (second hour) of the lesson especially in
the first few lessons. There however can be a number of things that can be done to
alleviate this problem….
So you need a 10 minute break after an hour to regain concentration, well why don’t
you park up and rest !
Well of course all the other driving instructors shoot past saying “Oh look at them
parking up, we drive for the full hour and not waste your money !!!”
So here is one simple technique:-
Consider safety !
In all of Europe (except Britain) it is compulsorily to have a safety driving pack, that
includes fire extinguisher, warning triangle, first aid kit and high visibility tabard, and
now even breath testers for alcohol. Why… because its common sense !
Lets take one of those items… the high visibility vest and see how we can use it to
your advantage !
Purchase two high visibility jackets and after an hour when your pupil is struggling,
stop at the side of the road. Both of you get out of the car, take out the vests from the
boot, get on the jackets and then go and check on one of your “show me tests” e.g.
inspect water levels.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xvii - xvii
This short break will enable your pupil to be refreshed….!
Why the high visibility vest… well you are being professional, you are being the best!
Most accidents can occur when other road users run into you ! By wearing a high
visibility vest you are instantly reducing the chance of being injured. After all what
do most members of the public do when they see a high visibility vest… apply the
breaks, as they think it could be a policeman !
Hint
Introduce driver safety from day one, not only will it help stop concentration
problems in two hour lessons, but look fantastic to other road users (and potential
customers) but one day you never know….“a life will be saved”
Remember a few years ago on motorways…. Now members of the public when
breaking down, get out of the car, cross the barriers and climb the embankment…
safety is slowly getting through !
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xviii - xviii
R Stride & Co
We have taken a number of driving instructors to a different level with help and
advice and in addition taken other franchisee driving schools to increased
profitability.
Over the years we have discussed the tax and business affairs of numerous driving
instructors and have a major in depth knowledge in this field. A small portion of
which are contained in these notes.
You have already seen that we have given you a vast knowledge of advice and we
have different approaches from the normal accountant who is in trade.
1. Using paperless office scenario we use technology to offer a higher level
of service. We do not employee secretarial staff . Our telephone lines are
answered by qualified accountants not a machine, who have access (via
technology) instantly to your affairs, giving a response immediately.
2. We prompt and remind you at key points of the year so deadlines are
always adhered to. Simple things to us are forecasting of tax payments
beyond the next 12 months!!!
3. Our fees are simple. Set at the outset ! No Increased once joined !No
hidden charges, including not being charged if you have a tax investigation
! Ask your current advisor what he is planning to do to stop tax
investigations and what charges are involved if you are picked up!
4. A full telephone (office hours) and email (outside office hours) support
with advisers who are experts in your field.
5. An interactive website with lots of general information included, including
direct access 24 hours a day to your own data, accounts, tax forecasts, job
status
6. More importantly we are business advisors. Most accountants may take a
few minutes out to speak with you regarding your business and then go
onto signing accounts and tax returns. Business and tax advice and
planning is our major concern with tax returns secondary.
How can we help you if your business is based further away ?
Normally we invite all our clients to see us at least twice a year. Initially we invite all
driving instructors for a 2 to 3 hour one to one seminar in all aspects of the business,
and then follow this up with two or three meetings during the first year to discuss
book keeping issues, business and tax planning. At the end of the year an in-depth
review is taken on all aspects of “what can we improve”
Obviously as you may live further away this would be impractical for you.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xix - xix
Initially we will give you a starter pack which consists of the following:-
• Dedicated book keeping book
• Dedicated drivers instructors diary
• Laminated charts for 2 hour lessons
• Sweets and baby wipes !
• This dedicated drivers instruction manual (pdf from website)
• Our dedicated book keeping instruction manual (pdf from website)
We then follow this up with a series of dedicated packs especially designed so that
you get a massive amount of advice. Return each pack for the next one to arrive…
Packs contain amongst the following headings:-
• Registration with the revenue
• Previous history
o Were you employed (on the right tax code ?)
o Were your last accounts compliant ?
• Our unique “anti-tax investigation” system
• Have you a will ?
• Pension and retirement planning
• Tax Planning
• Advertising techniques
• Personal financial planning e.g. outstanding credit cards, loans,
mortgages
Each pack is designed that you will get more information about certain areas that the
normal accountant does not even cover !
Important
We will give you more advice in each pack than the normal accountant does all year !
At the year end if you do not wish to come to see us, again we will arrange for your
books to be picked up and delivered safely to us (please ask if you require this
service), and then supply you with a full pack both business and tax review in detail
posted. Graphs of previous business, tax credits information all included…A further
telephone consultation will be undertaken if required.
Don’t forget you have access to me and my team at any time within the set fees for no
added cost.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xx - xx
What Happens Next ?
Stage 1 As you have already asked for this manual via our website we will
send you a registration pack (to register you with the revenue if
required)
Stage 2 We will send you our book keeping system and communicate with you
on how to use it.
Stage 3 We will communicate with you to sort out your previous tax affairs
Stage 4 We will send you our “anti-tax investigation” pack
Stage 5 We will register you on our website so you have access to all the other
information sheets we have prepared
Stage 6 We will continue to communicate with you over the forthcoming
months until next 5th
April (2018) and make sure you are “on track”
Important
All this information we have just given to you, which no other accountant will, is just
the start….
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxi - xxi
Other areas
Definition of Business Bank Account
Throughout this manual and also the book keeping manual I keep referring to business
bank accounts.
It is not necessary from an Inland Revenue point of view to have a “business” account
but purely a second account that is used entirely for business.
Please keep your business and private affairs separate.
E.g. on a daily/weekly basis as per our book keeping instructions please enter your
income in your diary and book keeping book. If lets say between Monday 9am and
Tuesday 5pm you enter and receive £259.50 in income then bank this money as
normal. Then when funds have cleared, use internet banking or other means and
transfer 15% (in this case £38.92) to a savings account. This will be sufficient for tax
savings at a later date.
Please ensure that no private payments are made through the business bank account.
The only payments should be as follows:-
• Franchise Fees
• Fuel
• Mobile Telephone bills
• Class 2 NIC
• Other business expenses
The Inland Revenue are not allowed to ask for private bank statements.. They do try,
but can be refused. If you use an account that is used for both private and business
they are legally allowed access to it !
The reason we try to avoid them seeing your private account is that with access to this
information they can then analyse it.. e.g. “we notice you have a Chinese takeaway
every week, but for a four week period you have not ! – We think that you still had
the takeaway but paid cash… paid by unrecorded takings”
Talk to the parents
Today, the majority of driving lessons are being paid by parents, and therefore good
communication must be made directly with them. Of the clients we talk to and
recommend that they speak to the parents tend to do better in the long term
financially.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxii - xxii
Simple techniques involved:-
• On picking up your pupil for the first time go and meet the parents
• Parents love feedback… create or use progress reports
Remember that most parents are cost conscious and could just be booking initial
lessons at reduced introductory rates and then plan to move on… you must make sure
that if the pupil (son or daughter) is to stay with you, then you must convince the
parents that you are the best and they have to stay with you…
Simply regular talks (or communication) to them….. its that easy !
Cutting overheads
In addition to profit improvements as mentioned previously in respect of increasing
income and reducing fuel costs the next way of increasing overall profit and income is
to reduce overheads.
There are some general rules:-
1. Don’t just spend money for the sake of it. Remember that purchasing that Sat
Nav system for £400 but only using a couple of times is not worth the tax
relief you are going to get (£16 !!!)
2. Remember that for every £10 of expenses not spent that’s £10 in your bank
account at the end of the year ! Don’t just buy that pack of stationery if you
are not really going to use it !
3. In addition to franchise fees and fuel (and other associated motor costs if
independent) your next biggest cost if mobile telephone. We will be
reviewing your telephone costs at the year end, but simply rules as follows:-
a. Contracts are better than pay as you go in our opinion
b. If you are exceeding your standard contract go up a contract level
4. Leasing a car is a better option than purchasing from a “piece of mind”
approach, and is generally better for tax purposes in the long term.
FOR FURTHER QUESTIONS AND ANSWERS SEE OUR Q&A SECTION ON
THE WEBSITE
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxiii - xxiii
Reducing tax liabilities
The common problem is worrying about reducing tax liabilities for clients. From
your point of view, please do not worry about this, that is what we are here for ! We
do not just process the paperwork you have sent us, we review the entire accounts and
tax return to reduce your liabilities.
There are three main areas of expenses that we and you need to consider when
finalising your year end accounts and therefore reducing tax liabilities:-
1. Essential costs (physically paid)
This group of expenses is obvious. Items that are essential for the running
of the business and are generally not missed. Please try to ensure that
these expenses are paid direct from the business bank account
• Fuel
• Franchise Fees
• Mobile costs
Even if invoices (receipts) are missing then these can be claimed as
evidence is usually sufficient as a payment from the bank statement
If payment of these items is made by other bank accounts (cash column),
credit cards (credit card column) or cash (cash column), please ensure that
they are properly recorded in the “credit card” or “cash” columns in the
book keeping book.
2. Non-essential costs (physically paid)
This group of costs are sometimes the generally missed items. Please refer
to the book keeping instructions manual where they are explained. In
general:-
• Car cleaning (either coin operated machines with no receipts or car
cleaning products for cleaning at home)
• Car parking (parking meters etc)
• Travel outside the business vehicle (mileage in private car and
other travel and accommodation)
• Postage and small amounts of stationery
We shall notify you if such items appear to be missing and if necessary
please make notes on a separate piece of paper that you wish to query.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxiv - xxiv
3. Virtual Expenses
This is a strange category. From your point of view you do not have to
worry about this area of expenses. It generally relates to items that you do
not physically paid out cash, but wish to claim for it.
Examples include
Use of home telephone bill not paid by business account
Use of gas/electric and other costs associated with using your home for
business.
In order to claim for these items we will obviously communicate with you,
but in order to feed us with the required information please ensure that
pack 3 has been returned. This is a booklet we will give you asking for a
number of areas. If you have not completed this booklet before you send
your year end accounts to us, please complete or ask us for a further copy.
Important
Ensure that our “Anti-Tax Investigation” book is completed before you
send us your year end records so its easier for us to claim the maximum of
tax relief’s for you.
Defining Private Use of Motor Vehicle
1. Write down the mileage of the car when you first pick up the car in your
book keeping book
2. Write down the mileage of the car on the 5th
April annually. This will give
you the total mileage of the car per fiscal year
3. Remember to write down start and stop mileages if you swap cars, or your
car goes in for service and you hire another.
4. Most journeys during the working week will be business use and these
include the actual lessons and getting to and from lessons. These do not
need to be recorded.
5. Private mileage is defined as followed:-
a. Mileage from home to destination for entirely private nature
b. Deviation from your business route for a private nature
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxv - xxv
6. Home to first pupil etc
Home to first pupil is business mileage as you operate your business from
home.
Broadband and Phone calls
1. Broadband is not allowable business expenses assuming that you
previously had broadband installed at home. As it is a fixed cost, there is
therefore no extra expense for the business when you start in self
employment.
2. If broadband was not installed at home prior to commencement of self
employment, please talk to us.
3. Home telephone bills can be claimed in the proportion that is used for
business use. Care has to be taken in this area especially if the home
telephone is part of an inclusive package of TV, Broadband and Home
Phone. Please discuss this with us.
Missing Receipts or No receipts
1. Do not panic if a receipt has been lost or you have forgotten to collect at
the retailer. Still enter the item in your book keeping book and claim for
the expense. Put a piece of paper in as a substitute and write on it “missing
receipt”
2. The Inland Revenue will take a sensible approach. E.g. if “Shell Garage”
appears on the bank statement and there is no receipt there will not be a
problem.
3. If you spend some money on an expense e.g. car wash machines, car
parking machines etc, that do not provide receipts then you may still claim
this cost. Enter the amount spent in your expenses list in your book
keeping book.
4. Remember that when cleaning the car yourself at home you may not claim
labour costs for yourself, just the cleaning materials. Payments to children
maybe allowable, please discuss this with us.
Claiming for Use of Home
1. During the preparation of your accounts we shall be claiming for use of
your own home for business use. Do not worry this does not effect any
council tax or future capital gains on the sale of your private residence.
2. Please ensure that you complete our “anti-tax investigation booklet” in
pack three so that we may claim the proper amount.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxvi - xxvi
Claiming for Use of Personal Computers or Laptops
1. If you wish to claim for a previous purchased (to the start of self
employment) computer, laptop or printer please let me have the following
information:-
a. The original date it was purchased
b. The original cost
c. An approximate value of the item at the start of business
d. The percentage you will be using the equipment for business.
What can’t be claimed for:-
1. Clothing
The Inland Revenue will not allow any costs towards clothing for business
purposes other that safety wear or uniform.
Examples of safety wear are fluorescent jackets and steel toe capped boots.
Uniform must have logo’s in prominent places and cover most of the
front/back of the item. E.g. a small logo printed on the back pocket of
trousers is not allowable.
2. Dry cleaning, washing etc etc
Again as this relates to personal items not allowable above, then this is not
allowable
3. Personal Hygiene
Any items relating to personal hygiene e.g. barbers, deodorants, grooming
etc again are of a personal choice and these items are not allowable for tax
purposes
4. Eye tests and doctors costs
Costs relating to personal issues e.g. testing of eyes, purchase of glasses,
doctors etc are again not allowable.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxvii - xxvii
Common Allowable Expenses
Are you claiming for all of these ?
• Franchise Fees or car rental / leasing payments
• Fuel
• Other motoring costs e.g. road tax, insurance, servicing, repairs, MOT,
cleaning and parking
• Advertising
• Stationery and Postage e.g. pens, paper, stamps, business cards
• Mobile phone costs
• Home telephone costs (if used and maybe proportionally)
• Accountancy Fees
• Renewal of ADI/PDI licences (not initial joining costs)
• Computer costs e.g. Software, toner and print cartridges
• Bank Charges and Interest on your business account
• Hire purchase or loan interest for the purchase of your car or other equipment
• Trade magazines and other subscriptions
• On going training an Continuing Professional Development costs
• Teaching Aids e.g. Highway codes, magnetic boards, iphone apps
Common Non Allowable expenses
• All initial training costs to gain your PDI or ADI licence
• Insurance policies to cover earnings due to sickness or accident
• Hosing costs, rents, mortgage, running expenses, extensions, alterations
• Work clothing and footwear unless showing a prominent company logo
• Food, drinks or snacks unless working in an area which requires an overnight
stay.
• Any entertaining of clients or pupils
• Glasses, sunglasses, contact lenses or other health related costs
• Medical expenses or gym membership
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxviii - xxviii
Appendix A – Pupil flowchart for 1 hour verses 2 hour lesson
What does a pupil get for a 1 hour lesson……?
The 10 minute slots at the beginning and end of the hour relate to time taken to get in
the car, adjust the seat, mirrors, admin time etc etc. On a 1 hour lesson on average
you get 40 minutes driving.
What does a pupil get for a 2 hour lesson…..?
So for spending £51.90 instead of 2 lots of £25.95 they get 25% more driving
time.
On average it takes 40 hours to pass a test, but taking two hour lessons, this can either
dramatically reduce this time or spending the extra time in lessons ensure a better
chance of passing.
R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….
- xxix - xxix
Appendix B – Pupil flowchart for 1 hour verses 2 hour lesson with recap.
What does a pupil get for a 1 hour driving lesson…….?
Taking into account the first 15 minutes of driving as a recap the pupil only receives
25 minutes of progression time for every hour spent driving….
What does a pupil get for a 2 hour driving lesson…………… ?
So for spending £51.90 instead of 2 lots of £25.95 they get 30% more
progression time…
What does this mean for your pupils:-
Average time to pass a test is 40 hours. 40 hours @ £25.95 ph = £1038.00
30% time saved 28 hours @ £25.95 ph = £648.75
Top Related