Tax Exemptions/Benefits - Driving Instructor

brennnic

Hi......I'm just wondering if anyone might be able to assist me with a query in respect of tax exemptions or more specifically in relation to benefits for sole traders such as a driving instructor.

I am close to completion of Driver instructor training (stage 3 in Ireland). I visited an Accountant to get some start up advice and on general requirements etc.

He advised that I must purchase a diesel vehicle for the purposes of driver instruction as tax cannot be reclaimed on petrol use and that it would be a no brainer. I have read another older thread on boards also which states similar re not being able to reclaim tax from petrol purchase as a driving instructor.

I just find it very hard to see how both the car industry and government bodies are trying to get us to move away from diesel (which I have no problem with) but you can then reclaim the tax benefits back for the purchase of diesel but not for petrol. It just doesn't make sense to me?

This would make a huge difference on the bottom line of any business, but I don't believe all driving instructors are driving around in diesel cars either. In fact, it is very difficult, if not almost impossible to now find a diesel supermini.

Am I missing something? An available exemption or benefit perhaps? Someone in fact told me they do reclaim their Vat on petrol but the Accountant I visited, who is well renowned, had said anyone claiming tax benefits on petrol just hasn't been caught yet.

I'm confused and this would make a significant difference to any business plan, yet I would love to succeed and fulfil my driving instructor ambitions.

Any advice would be greatly appreciated, many thanks.

relax carry on

You are confusing claiming the VAT element of the diesel expense as a deduction from the vat due on your services with calming the expense of paying for petrol/diesel as an expense I'm computing your taxable profit for income tax purposes.

brennnic

Thanks for your response rco. You're right, I probably don't have a good handle on it and am panicking a bit about going from a private sector job after all these years to being self employed and perhaps am overthinking it.

So there is possibly no real disadvantage with going with a petrol option so !?!

SureYWouldntYa

https://www.boards.ie/discussion/comment/120227482#Comment_120227482

As the accountant you met told you, the disadvantage is that you can't claim back the vat on petrol. He is correct that is not reclaimable and anyone doing so is incorrect, see the below guide

https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Goods/recovery-of-vat-on-motor-vehicles.pdf

The gross cost of the petrol would still be a deduction in computing your profit assessable for tax, but if it was diesel purchases where you were able to reclaim the VAT then only the net cost (gross cost less vat reclaimed) would be a deduction

The advantage to diesel is being able to deduct the vat when submitting your vat returns. Even if you don't start out with large enough turnover to require vat registration, you'll be locked into the car you purchase for a period so it's best to have a diesel

brennnic

Thanks so much 'SureYWouldntYa' for your response, which I totally missed. Have just popped back on here again since I have gained my licence and then saw your response, so I'm sorry for late acknowledgement.

That is very helpful and makes sense to me, thanks. The only problem now is the complete lack of diesel supermini's available by car makers, as they are choosing not to make them anymore and the car needs to be new to get the tax at purchase back.

Scratching my head on many levels but will get there, thanks again.