When is a Van not a Van? when its a VW Transporter Kombi! Reply

It makes a big difference whether a vehicle is treated as a Car or a Van for tax purposes, in summary:

  1. Benefit in Kind on Cars is linked to CO2 where as on a Van its Flat Rate (and could be zero if your private use is insignificant)
  2. Vans qualify for the Annual Investment Allowance, Cars have restricted Capital Allowances
  3. You can reclaim VAT on Vans but its much harder to reclaim VAT on cars

HMRC have some guidance in EIM23150….

Under this measure, a double cab pick-up that has a payload of 1 tonne (1,000kg) or more is accepted as a van for benefits purposes. Payload means gross vehicle weight (or design weight) less unoccupied kerb weight (care is needed when looking at manufacturers’ brochures as they sometimes define payload differently).

Under a separate agreement between Customs and the Society of Motor Manufacturers and Traders (SMMT), a hard top consisting of metal, fibre glass or similar material, with or without windows, is accorded a generic weight of 45kg. Therefore the addition of a hard top to a double cab pick-up with an ex-works payload of 1,010 kg will convert the vehicle into a car (net payload reduced to 965 kg). Under this agreement, the weight of all other optional accessories is disregarded. HMRC has also adopted this treatment.

http://www.hmrc.gov.uk/manuals/eimanual/eim23150.htm

Kombi’s have been a grey area, but not any more, following the case of Noel Payne v HMRC as reported by Croner Taxwise…

Under ITEPA 2003 S.115, a van is a vehicle where its primary construction is for the conveyance of goods or burden.  Kombi vans and those similar have not previously been thought to fall into this category due to them being designed to carry both goods and people. Historically, HMRC has offered a concession from 2002/2003 onwards for vehicles of a very similar construction, double cab pickups (including both uncovered and covered models), if the payload capacity of the pickup exceeds a metric tonne. HMRC accepts that these vehicles can be treated as a van for benefit in kind purposes.

With such similarities in the construction of the Kombi van, this has led to this concession being applied to the Kombi vans as well. However, in Noel Payne vs HMRC, a judgment was reached that the primary construction of the kombi van was not for the conveyance of goods alone but rather that its purpose was for the conveyance of both goods and people equally. This means that the Kombi did not meet the requirement to be considered to be a van and therefore for benefit in kind purposes it is a car.

The advice from Croner is that from now on Kombi’s and any van built to carry passengers should now be treated as a car for benefit in kind purposes, the case did involve a Vivaro as well but that was manufactured as a Van and later converted so that was allowed to be treated as a Van.

This also has implications for VAT and Capital Allowances.

steve@bicknells.net

What are tax implications if a company pays a Directors personal expenses? Reply

Businessman struggling with large Expenses

It’s not uncommon for Directors personal expenses to get mixed up with business expenses, for example the director is out buying things for the company and picks up some items for themselves at the same time and it goes on the same bill.

In a perfect world the Director would just repay the cost of personal purchases to the company, but we don’t live in  perfect world, so what are the options?

Directors Loan Account

You could post the cost to the Directors Loan Account. These accounts are normally repaid when the Director is paid either salary or dividends.

If the loan is not cleared by year end then the company will have to pay a temporary corporation tax charge of 25% and reclaim the tax when the loan is repaid using form L2P

There may also be a notional amount of interest (4%) charged as a benefit in kind on the loan.

Benefit In Kind

You could have the expenses as a benefit in kind, some benefits may even be tax free, here is a list of my favourite tax free benefits

  1. Pensions – Up to £40k can be paid in to you pension scheme by your employer (2015/16)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115) – new rules coming soon
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog

Private Use of Company Assets

It may also be worth considering private use of company assets.

  • The cost of the asset is allowed against Corporation Tax and you can claim Capital Allowances and the Annual Investment Allowance.
  • The Assets could be purchased from the Director but they must be transferred at Market Value.
  • The Benefit In Kind is generally 20% of the market value

steve@bicknells.net

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It’s a Pool Car isn’t it? Reply

Black Elegant Vintage Car

Yet again, we have another case on Pool Cars which could have been prevented had the right procedures been put in place.

The Case was decided in May 2015 and involved Mark and Trudie Holmes and their company KMS Logistics (UK) Ltd. The company owned 7 prestige cars which were used assist in maintaining and attracting clients.

There was no prohibition (not even a verbal one) on the private use of the vehicles, mileage logs showed that the cars were mainly used by Mr & Mrs Holmes. Until 2003/4 they had been declared as a benefit in kind but then the stopped being declared! There even seemed to be confusion over who owned the cars.

So not surprising Mr & Mrs Holmes lost the case.

Read the full details by clicking here

So what should you do to prove there is no private use:

  1. Keep the car on the company’s business premises
  2. Keep the keys at the company’s business premises
  3. Prepare a Board Minute
  4. Make sure your contract of employment bans private use
  5. Keep a mileage log
  6. Insure the car principally for business use

HMRC have specific rules on keeping vehicles at home in EIM23465

Even if you do meet the 60% rule you still have to prove ‘no private use’

steve@bicknells.net

 

 

Would you give your staff a company motorbike? Reply

Extreme couple sitting by motorcycle. Adventure and travel

Motorbikes have a clear tax advantage over company cars because they are classified as plant and machinery. This is better for both employers and employees.

Capital Allowances are restricted on cars based on CO2 emissions and employees also get taxed on the benefit in kind based on CO2.

Motorbikes being plant and machinery aren’t restricted and you could use the Annual Investment Allowance to offset the cost.

The Benefit In Kind is assessed  as 20% of the cost of the motorbike but there will also be a benefit in kind on fuel, repairs and insurance.

The company will also have to pay 13.8% Class 1A NI on the benefit in kind but that applies to most benefits including cars and motorbikes.

Would motorbikes be a viable option for your employees?

steve@bicknells.net

Trivial Benefits £50 exemption deferred Reply

Businessman looking at a small present with a magnifying glass

It had been proposed that there will be a new statutory exemption for trivial benefits up to a limit of £50 from from 6 April 2015, this measure is not included in the first Finance Bill of 2015, it has been deferred until after the election.

The £50 tax exemption would have been on items such as birthday and Christmas gifts. The legislation would have also introduced an annual cap of £300 in some circumstances.

So we are stuck with the old rules for now

An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).

http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm

There are some non taxable benefits you be interested in….

HMRC Helpsheet 207 – Non-taxable payments or benefits for employees

http://www.hmrc.gov.uk/helpsheets/hs207.pdf

steve@bicknells.net

How you can update HMRC on your company car details Reply

mann im auto

Based on HMRC Statistics approximately 1 million employees have a company car, its the 2nd most popular benefit in kind. The most popular benefit in kind is Private Medical Insurance (2.2m employees).

Often employees will change cars or start/stop having fuel for cars during a tax year and the tax on company cars can be significant, you can use this HMRC calculator to assess the the tax.

http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

HMRC have just introduced a new Check and Update Service for Employees so that you can make sure HMRC have the correct information

https://www.gov.uk/update-company-car-details

You may find that it would be better for your employer to give you a loan, beneficial loans up to £10,000 aren’t a taxable benefit.

https://www.gov.uk/expenses-and-benefits-loans-provided-to-employees/whats-exempt

There companies like Maxxia that promote salary sacrifice schemes for cars

http://maxxia.co.uk/asset-finance/car-salary-sacrifice/

steve@bicknells.net

The Yacht that wasn’t a benefit in kind Reply

Yacht de luxe.

This is the case of Gillian Rockall v HMRC (2014) HKFTT 643.

Mr Michael & Mrs Gillian Rockall were involved in running a hotel and conference centre and providing high-end residential courses, amongst the companies assets was a 140 foot ocean-going yacht costing $11.9 million called Masquerade of Sole.

HMRC issued assessments on Mr & Mrs Rockall for the tax years 2000-2001 to 2008-2009 on the basis of personal use (benefit is normally assessed as 20% of the market value).

The Yacht was used for:

  • Business Networking
  • Customer Training
  • Exploring Business Opportunities in the Caribbean and Mediterranean
  • Friends and Acquaintances were taken on occassional trips to provide a opinion on opportunities

The Yacht was also placed with an agent for charter when not required for the purposes above.

The First-Tier Tribunal took the view that the use of the Yacht was only for Business and not for private purposes.

However under S203 ITEPA 2003 a benefit in kind would arise because the asset was at the disposal of the employees.

The Rockalls appealed to the First-Tier Tax Tribunal, on the grounds that the use of the yacht was tax-deductible under s365 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This requires that the item comprising the benefit in kind was used ‘wholly, exclusively and necessarily in the performance of the duties of the employment’.

The tribunal has now ruled that the yacht was bought and operated purely for business purposes and thus was fully tax-deductible for both the Rockalls.

– See more at: http://www.step.org/yacht-used-impress-customers-were-legitimate-expense#sthash.dNRhVYmG.dpuf

steve@bicknells.net

How far would you go to retain staff? 1

Biological Clock

Apple and Facebook are now offering to pay for female employees to freeze their eggs!

The initiative is part of the so-called “perks arms race” as Silicon Valley firms battle to recruit top talent and it is hoped the perk will attract more women into a traditionally male-dominated sector. (Sky News)

Fertility specialist Philip Chenette is quoted as saying “providing egg-freezing coverage for employees can be viewed as a type of payback for women’s commitment in a mael-dominated industry where technology firms are often competing to attract female talent” (NBC News)

https://www.pacificfertilitycenter.com/fertility-preservation/

The cost for egg freezing in the US is about $10,000 (£6,200) for every round, as well as $500 or more for storage each year.

Apple also offer assistance with adoption.

Will UK companies soon be offering this perk?

steve@bicknells.net

Pool Cars – Do you have a ‘no private use’ Policy? Reply

Pool Cars

The latest case Vinyl Design Ltd v HMRC [2014] TC 03345 highlights why policies and mileage records are important.

Here are the facts of the case:

  • The company’s only 2 employees were the directors
  • They had different cars for private use
  • They argued the Pool car was only for Business Use
  • They had no policy
  • They had no Mileage Records
  • Pool Cars kept at home due to risk of vandelism

Not surprisingly HMRC won the case !!

So what should you do to prove there is no private use:

  1. Keep the car on the company’s business premises
  2. Keep the keys at the company’s business premises
  3. Prepare a Board Minute
  4. Make sure your contract of employment bans private use
  5. Keep a mileage log
  6. Insure the car principally for business use

HMRC have specific rules on keeping vehicles at home in EIM23465

Even if you do meet the 60% rule you still have to prove ‘no private use’

steve@bicknells.net

15 Brilliant Tax Free Benefits in Kind 1

Tax Free Bags Represent Duty Exempt Discounts

It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:

  1. Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115)
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog

steve@bicknells.net