MOTOR VEHICLE EXPENSES- DEDUCTIBILITY/ KEEPING LOGBOOKS
Motor
Vehicle Expenses are generally deductible:
| If
they are incurred in gaining or producing gross income, or |
| If
they are necessarily incurred in carrying on a business for the purpose of
gaining or producing gross income |
To
claim this deduction, adequate business records must be kept.
This particularly applies to motor vehicles which are used partly for
business purposes and partly for other purposes.
Where
insufficient records are maintained, Inland Revenue Department arte required to
limit the allowable deductions for all motor vehicle expenses (including
depreciation) to a maximum of 25% of the amount claimed.
A
taxpayer need only keep a logbook recording total distances travelled and the
reason for business trips, in any consecutive 90 days in a year which reflects
average proportion of travel.
The proportion of business use established can be used for a period not
exceeding three years.
If
actual business use fluctuates to a degree of 20%
more (or less) than the previous records, the logbook ceases to apply i.e a new
logbook record of three months should be prepared.
The logbook can apply to a replacement vehicle if it is representative of the business use of the previous recorded vehicle.
Motor
vehicle expenses can only be claimed by self employed persons from their
work base.
Travel between a taxpayer’s home and place of business, if his/her
business base is not the home, are not claimable for tax purposes.
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