Mechanics need to buy tools for getting their task done. They spend a lot of their cash on equipment and tool. Fortunately, they can make a mechanic tax rebate claim, if their employers have not paid them for the tools.

FAQs Related to Mechanics Tax Rebate Claims

What is flat rate expense?

HMRC has designed an annual tax relief amount for specific common expenses in particular professions. For such claims tax payers will not need to supply supportive evidence.

What is flat rate expense value for mechanics?

Mechanics are entitled for flat rate refund of $120 annually, which is proposed to cover equipment and tool cost, which the mechanic buys himself.

Claims for flat rate expense can be made for past 4 tax years. After the claim your tax code gets changed. It means you earn annual tax deduction of $120 annually.

What if more than $120, which is the set annual tax deduction amount gets spent on equipment or tools in future?

If in future, if you spend more than $120 annually allowed by HMRC as flat rate then you are allowed to make separate tool tax claim through Mechanics Capital Allowance.

What is tool allowance?

Tools you purchased for work purpose and not reimbursed by employer then tool tax allowance can be claimed through tax code. Fortunately, you have the receipts. It means you can get 20% of tool cost made without claiming tool allowance through tax code.

If you need to wear protective clothing then claim allowance for the cost of washing it. Even without receipts tool allowance can be made but through tax code.

What supportive evidence does HMRC require?

If more than $120 [allocated flat rate allowance] is spent annually then claim for capital allowance tool rebate can be made. For this you will need supportive evidence because amount is huge. HMRC needs the following evidence to support mechanics tax rebate for tools.

  • Receipts
  • Activity reports
  • Finance agreement

What is mechanics capital allowance?

Capital allowances claims can be made on large items bought for business purpose. It includes vehicles, machinery or intangible things like intellectual property or patent. These are regarded as capital expenditure by Tax Department, so Capital Allowances.

It is a onetime investment and not daily business operating cost. Capital expenditure can be removed from total profit, before paying tax. Capital allowances can be claimed by sole traders, PAYE employees, limited and partnership companies.

Are finance payments considered for tax refund claim?

Yes, interest on premiums you pay according to finance agreement is eligible for tax relief claim. Finance payments apply to purchase of large items. However, HMRC will need financial agreement paperwork as evidence. Deadline for submitting tax relief claim for finance payment is past four years and after this there will be no refund.

What is EIM 36870? 

EIM 36870 applies to those who purchase equipment and tools for work and is vital for mechanics to make backdated claims from past tax years. Deadlines are similar to self-assessment system i.e. you have three years post 31st October following tax year you claim for.

Capital allowances claim can be a complex process, so it is wise to hire professional tax consultant and get it done right the very first time.