DRIVING OUTSIDE YOUR LICENSED AREA: When taxi drivers can and cannot claim mileage fuel expenses

Taxi drivers, like many other self-employed professionals, have the right to claim certain expenses against their taxable income. One of the most common expenses is fuel mileage, which can be claimed for business-related journeys.

However, the rules around what constitutes as valid mileage claims are specific and need to be clearly understood to avoid issues with HMRC.

According to guidance from the Accountancy Partnership, mileage can be claimed as a legitimate business expense, but only under certain conditions. The key requirement is that the journey must be directly related to your work as a taxi driver. For example, if you’re on shift and transporting passengers or returning to your licensed area after a drop-off, the miles covered during these activities can be claimed.

It's important to note that the mileage must be incurred during your working hours. Any miles driven outside of these hours do not qualify for a claim. For instance, if you are driving your taxi for personal reasons or running errands unrelated to your work, these journeys cannot be claimed.

Commuting and Licensing Area Restrictions

One of the most important aspects for drivers to consider is their licensed area. If you live within your licensed area, the journey from your home to your first passenger pick-up point can be claimed as a business expense. However, if you live outside your licensed area, the situation is said to change. In this case, the miles driven from your home to your licensed area cannot be claimed as a business expense. This is because commuting from home to work is generally not considered a business activity under HMRC guidelines.

This restriction can be particularly significant for drivers who live far from their licensed area, as it means mileage costs must be borne personally. It’s therefore crucial for drivers to keep accurate records of their journeys and ensure they only claim mileage that qualifies under these rules.

However, in today’s evolving taxi trade, many cabbies also operate through ride-hailing or taxi apps. These apps have introduced the opportunity of cross-border hiring, where drivers can pick up fares outside of their licensed area. This has raised questions about how mileage should be treated when a driver is technically available for work throughout their commute, even when outside their licensed area.

Accountants can provide tailored guidance on how to navigate these complexities. They can advise on the best ways to keep records and whether any specific miles driven during such cross-border trips can be legitimately claimed.

Understanding these guidelines is essential for any taxi driver looking to manage their expenses effectively. Accurate record-keeping is not just about maximising your allowable expenses but also about ensuring compliance with HMRC regulations. Any errors in mileage claims, whether accidental or deliberate, could lead to investigations, fines, or other penalties.