Bookkeeping for freelance driving instructors: certificate, lesson car and VAT

Your instructor certificate and your start

Anyone giving driving lessons for payment needs an instructor certificate under the Dutch act on driving instruction. That certificate is valid for a limited period and you keep it current with periodic refresher training; check the current requirements with the body that handles the exams and registration. Costs of refresher training and renewal are ordinary business costs. For the instructor training itself, deductibility depends on timing and purpose, see deducting study and training costs.

Many instructors start as freelancers at an existing driving school, in that school's car and with students the school supplies. That is vulnerable for tax: if the school sets your schedule, your rate and your way of working, it looks very much like employment. Read bogus self-employment and the DBA act before you sign, and preferably also teach your own students under your own name.

VAT: 21 percent on driving lessons

Lessons for a driving licence do not fall under the VAT exemption for education. So you charge 21 percent, on single lessons as well as lesson packages. Because your students are private individuals, you quote prices including VAT; when setting your rate, bear in mind that roughly a sixth of what comes in goes to the tax authorities. Only certain recognised vocational courses, such as refresher training for professional drivers, may be exempt under conditions; do not simply assume so.

If a student pays for a package in advance, VAT is due when you invoice or receive the money, not only at the last lesson. If a student stops halfway and you refund part of it, you correct that with a credit note. If you accept cash or a payment request in the car, make sure every receipt lands in your records with the date and the student's name.

Exam fees as a disbursement

When you book an exam or interim test for your student, you usually pay the exam fee yourself first. That amount really belongs to your student: you advance it, in the student's name and for the student's account. If you pass it on exactly as you paid it, as a separate line on your invoice, it is a disbursement. It is then not revenue for you, not a cost, and you charge no VAT on it. The condition is that you give the student an invoice, even if they are a private individual; without such an invoice you owe 21 percent VAT on the full amount. The conditions are set out in passing costs on to your client.

Book exam fees to a suspense account rather than among your costs, and link each payment to the recharge to the right student. That way you see at the end of each quarter whether everything has been repaid. Keep the exam body's confirmations per student, because in an audit they are your proof that it was a disbursement.

The lesson car: dual controls, benefit in kind and private use

Your lesson car is almost always a business asset. You capitalise the purchase and the dual-control conversion together and depreciate them, at most 20 percent a year and with a residual value. For tax a lesson car is simply a passenger car, and ordinary passenger cars are excluded from the investment deduction; so do not count on it without checking first. If you drive more than 500 private kilometres a year, a benefit in kind applies, see calculating the benefit in kind.

For VAT you deduct the VAT on purchase, fuel and maintenance, and you correct private use once a year in your last return. Without mileage records you use the flat rate of 2.7 percent of the list price, or 1.5 percent from the fifth year after the year the car was first used. Note: for VAT, commuting counts as private; for income tax it counts as business. More in private use of a car and VAT.

Frequently asked questions