Do you get tax free parking? 5

Pool Cars

If you work in town or city  parking costs can be high.

So if your employer gives you a parking space its a big help.

There is a tax exemption (tax and NI) for parking facilities that are within a reasonable distance of where you work and its not restricted to on-site parking.

The parking space can also be used in the evenings and weekends and isn’t restricted to the nearest car park.

You can also use Salary Sacrifice.

See EIM 21685 for further details

So yes its tax free, so why is there any confusion?

Well a few years ago (2009), we had stories like….

Commuters who drive to work face a new ‘parking tax’ of up to £350 a year.

Ministers are backing a ‘workforce parking levy’ which will come into force in Nottingham in 2012 – and is likely to be adopted across the country.

The pilot scheme will see firms with more than ten parking places for staff charged £250 a year for each, rising to £350 in two years.

Employers would be free to pass on the charge to their staff – meaning it would effectively be a tax on driving to work.

This meant that there was some confusion, but its all clear now and free parking is an excellent tax free employee benefit.
steve@bicknells.net

Can I have a Tax Free Lunch? 6

Business People Having Meal Together

Let’s look at the options….

Exemption for Canteen Meals

Employees can be provided with free or subsidised meals provided generally to employees served on the business premises where the following 3 conditions are met:

  1. The meals are provided on a reasonable scale
  2. That all employees or all those at a specific location may obtain free or subsidised meals
  3. If the meals are provided in a restaurant or hotel at a time when meals are being served to guests/clients part of the dining area is designated for employees

Not everyone needs to use the facility they just need the option to use it and its is possible for senior management to have superior meals.

This exemption is not available where only select employees are able to get a free lunch.

HMRC are happy to accept Tea and Coffee as trivial benefits that can be ignored.

Benchmark Subsistance

Since April 2009 employers have been able to pay their employees HMRC approved flat rate allowances referred to as Benchmark Subsistance, the rates are:

  • £5 if you buy a breakfast and start your business journey before 6am
  • £5 if you’re out of the office on business for more than 5 hours, and buy one meal
  • £10 if you’re out of the office on business for more than 10 hours, and buy 2 meals
  • £15 if your business trip keeps you beyond 8pm, and you buy an evening meal

So £15 is the maximum

You can only claim if:

  1. travel is required as part of your dutues or you are working at a temporary work place
  2. you are away from your work place or home for more than 5 hours
  3. you are expected to pay for food and drink after starting your journey

Meal Vouchers

Vouchers can be issued tax free but only up to the value of 15p per working day and the voucher must be non-transferable and used for meal only.

Travel Expenses

I have separate blog on this topic https://stevejbicknell.com/2013/02/13/what-travel-expenses-will-the-taxman-allow/

steve@bicknells.net

What can you include in a PAYE Settlement Agreement (PSA P626)? Reply

Businessman looking at a small present with a magnifying glass

 

 

PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.

 

 

Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).

The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:

Benefits of £5,000 x 40 per cent = £2,000 tax

Grossed-up tax = £2,000 x 100/100-40 = £3,333.33

Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99

Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32

.
PAYE Settlement Agreements can only be created for:

 

Minor Benefits

HMRC (PSA1060) examples (not exhaustive) of what may constitute a minor item.

  • incentive awards
  • reimbursement of late night taxi fares outside s248 ITEPA 2003
  • personal incidental expenses in excess of the statutory daily limit
  • present for an employee in hospital
  • staff entertainment, for example a ticket for Wimbledon
  • use of a pool car where the conditions for tax exemption are not satisfied
  • subscriptions to gyms, sports clubs etc
  • telephone bills
  • gift vouchers and small gifts

Irregular Expenses

HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.

  • relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
  • occasional attendance at an overseas conference where not all the expenses qualify for relief
  • expenses of a spouse occasionally accompanying an employee abroad
  • occasional use of a company holiday flat
  • one off gifts which are not minor.

Impracticable Items

HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item

  • free chiropody care
  • hairdressing services
  • Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
  • cost of shared taxis home which do not satisfy s248 ITEPA 2003
  • shared cars.

Gov.uk has guidance on How to get a PSA

steve@bicknells.net

 

Will I be taxed on Christmas gifts recieved at work? Reply

Christmas Gifts

It’s Christmas and even though times are tough, you could still get a gift from your employer or client or supplier, will it come with a tax bill attached?

The answer depends on the value.

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

The Helpsheet says, certain gifts from third parties are non-taxable if all these conditions are satisfied:

• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and

• the person making the gift is not your employer or a person connected with your employer, and

• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular services which are to be performed, and

• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and

• the gift cost the donor £250 or less, and

• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.

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

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

Will the employer or supplier or client have to account for VAT?

You do not have to account for VAT on business gifts made to the same person so long as the total cost of all the gifts does not exceed £50, excluding VAT, in any 12-month period. To check this it is acceptable for you to adopt any 12-month period that includes the day on which the gift is made.

But where the following apply:

  • the total cost of business gifts given to the same person in any 12-month period exceeds £50
  • you were entitled to claim the VAT on the purchase as input tax

you must normally account for output tax on the total cost value of all the gifts. How to work out the cost is explained in Notice 700, ‘The VAT Guide’.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000091#P32_2034

steve@bicknells.net

Did you have fun on your corporate day out? you could be in for a tax bill 2

Small businesses across the UK will soon see HM Revenue & Customs (HMRC) clampdown on corporate away days.

That is according to law firm Pinsent Masons, which said that the department will now ask for tax and National Insurance on the cost of such events.

Joe Quinn, the company’s Director, explained: “If tax inspectors think that there is too much of a fun or social element to a company’s offsite event then they should be treated as though they are a taxable treat for employees.”

http://www.taxassist.co.uk/francksidon//?pg=news.php&article=12790

Staff Parties and Annual Functions costing less than £150 per head are exempt if open to staff generally but Corporate Hospitality is another minefield

Her Majesty’s Revenue and Customs (HMRC) make it quite clear that members of staff, such as sales representatives, who would be expected to attend corporate hospitality events in order to entertain clients as part of their role within the company, would be exempt from any potential charge on benefits in kind. Other members of staff, who were present purely as a perk of the job, would be deemed as being in receipt of a benefit and therefore would be liable for a charge. Visitors, not employed by the hosting company would be exempt. The company paying for the corporate hospitality would also be able to treat the expenditure as entertaining clients, for which they could claim tax relief.

http://ukmoneymarket.co.uk/other/corporate-hospitality

steve@bicknells.net

 

 

What are the tax benefits of Low Emmission and Electric Cars? Reply

If you have a company car the chances are Benefit in Kind tax will be a concern for you, HMRC have a calculator to work this out

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

But both you and your company could be better off with a Low Emmission or Electric Car.

Capital allowances

If you buy a new car for your business that has CO2 emissions of 110 grams or less per kilometre (g/km) driven, or is electric, you can qualify for a 100 per cent first-year capital allowance. This allows you to offset the whole cost of the investment against taxable profits in the year you make the purchase until 31 March 2013.

Vehicle taxes

New cars have fuel economy labels which show how fuel efficient they are. The label shows how much CO2 the car emits and also how much vehicle tax you will have to pay each year. Lower CO2 emissions mean lower vehicle tax and lower running costs.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1080532548&type=RESOURCES

Benefit in Kind

Currently zero emmission electric cars have zero benefit in kind but this is set to change in 2015 when the rate will be 13%.

A 5% Benefit in Kind band is now in place for cars that emit below 75g/km CO2, but this will also change in 2015.

steve@bicknells.net

Tax Advantages of a Classic Car 7

A classic car is one where:

  • the age of the car at the end of the year of assessment is 15 years or more and
  • the market value of the car for the year is £15,000

I found a 1968 Jaguar MkII for sale for £15,000 on

http://www.classiccarsforsale.co.uk/classic-car-page/165880/1968-jaguar-mkii/

The Mark 2 gained a reputation as a capable car among criminals and law enforcement alike; the 3.8 Litre model being particularly fast with its 220 bhp (164 kW) engine driving the car from 0-60 mph (97 km/h) in 8.5 seconds and to a top speed of 125 mph (201 km/h) with enough room for five adults. Popular as getaway cars, they were also employed by the Police to patrol British motorways.

The Mark 2 is also well known as the car driven by fictional TV detective Inspector Morse played by John Thaw

http://en.wikipedia.org/wiki/Jaguar_Mark_2

Assuming the list price was £2,000 (I can’t find the actual list price), the taxable benefit in kind would be £2,000 x 35% (maximum)x 40% (higher rate tax) = £280

As long as the Market Value is below £15,000 these rules apply above £15,000 the market value is used for the calculation, you can pay for your private fuel to avoid the tax on that.

steve@bicknells.net

The tax advantages of company vans Reply

What is a company van?

The Inland Revenue define this as a vehicle provided by an employer, built primarily to carry goods or other loads, and with a ‘design weight’ of up to 3,500 kilograms. This definition allowed drivers of pickups with car-like levels of luxury to avoid the much heftier levels of company car tax. Dual purpose vehicles have more than one row of seats but must be able to carry a 1 tonne payload to fall within van tax rules.Beware of specifying too many options such as a heavy hardtop which could take the payload below 1000kg.

Motorhomes and minibuses are not designed to carry goods, so will be taxed as company cars, not vans.

http://www.comcar.co.uk/newcar/companycar/budget/vantax.cfm

Benefit In Kind Tax

2011/12 Van benefit is a flat rate of £3000

2011/12 Van fuel benefit is a flat rate of £550

This is normally much cheaper than the benefit in kind on cars, try these calculators and compare the difference in tax.

Car Tax Calculator http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

Van Tax Calculator http://www.vantax.co.uk/newcar/companycar/vancalc/g1select.cfm?clk=3

If your private use is insignificant then there is no benefit in kind.

‘Insignificant’ other private use means that the employee’s private use of the van in addition to ordinary commuting is very much an exception to normal usage and only lasts for short periods on an occasional and irregular basis. For example:

  • making a slight detour to buy a newspaper on the way to work counts as insignificant private use
  • an employee using a van to do their weekly shopping counts as more than insignificant private use – see the next section for the rules that apply in this case

http://www.hmrc.gov.uk/paye/exb/a-z/v/vans.htm#1

Capital Allowances and Annual Investment Allowance (AIA)

You can claim capital allowances on Vans as Plant & Machinery and they aren’t subject to the same restrictions as Cars, so if you are planning to buy a van now would be a good time as the Capital Allowances are higher before April 2012.

From April 2012 the rates of capital allowances will be reduced from (a) 20% to 18% and from on the Main Rate Pool (b) 10% to 8% for  ‘special rate’ expenditure respectively. At the same time the maximum amount of the Annual Investment Allowances (AIA) will be reduced to £25,000 a year (currently £100,000). So you might want to consider buying assets prior to April 2012 to take advantage of the current rates.

steve@bicknells.net

Company Car or Car Allowances, which is best, there’s only one way to find out…. 7

Let’s take an example:

VW Golf Blue Motion 1.6 TDI 105PS £18,860 Diesel CO2 99g/km

http://www.volkswagen.co.uk/#/new/golf-vi/which-model/engines/overview/

Using the HMRC calculator http://cccfcalculator.hmrc.gov.uk/CCF0.aspx

Tax Liability indicator:                                     20%                        40%

Company Car Tax (2012/2013)                    £490.20                £980.40

Company Car Fuel Tax (2012/2013)          £488.80                 £977.60

Total                                                                        £979.00                  £1,958.00

If you (the employee) pay for your private fuel you won’t have to pay tax on it.

 

The Employer will need to pay Class 1A National Insurance on the benefit in kind

Car benefit charge (2012/2013)                  £2,451.00

Car fuel benefit charge (2012/2013)         £2,444.00

Total                                                                         £4,895.00

Class 1A 13.8%                                                       £675.51

In addition the employer will have to fund the purchase of the car based on this link the interest will be at 4.5% http://www.volkswagen.co.uk/#/new/golf-vi/which-model/compare/483/ over 36 months that’s a cost of around £3,572.30 in total

Assuming the car is purchased rather than just hired, to offset Depreciation your employer can claim Capital Allowances based on CO2 emissions:

CO2 emissions

Capital allowances treatment of expenditure

Over 160 grams per kilometre (g/km)

Goes into the special rate pool and qualifies for writing-down allowances at the rate for the special rate pool, currently 10 per cent per annum.

 

160g/km or less but more than 110g/km

Goes into the main pool and qualifies for writing-down allowances at the rate for the main pool, currently 20 per cent.

 

110g/km or less (but note that the first-year allowance for cars in this category is due to expire in 2013)

You can claim up to 100 per cent allowance in the accounting period when they were bought, the balance (which may be nil) goes into the main pool in the next year.

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1086394511&type=RESOURCES

So in our case the CO2 emissions are 99 g/km so 100% allowances apply, but subject to a balancing charge on disposal.

So what if your employer offered you a car allowance of £300/mth and business mileage at approved mileage rates http://www.hmrc.gov.uk/rates/travel.htm

If you were a 20% tax payer you would pay tax (20%) and NI (12%) on the extra income so net, your car allowance would be £204/mth x 12 = £2,448

 

Assuming you do 10,000 business miles that’s worth £375/mth x 12 = £4,500 (note that the mileage rate drops to 25p after 10,000 miles)

 

Less the cost of Fuel using HMRC rates http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

Is 12p per mile so the cost is £100/mth or £1,200 per year

 

So overall from the employees perspective, using this example (ignoring private mileage), Net Allowance £204 plus Mileage £375 less Fuel £100 = £479 per month the cost of the Blue Motion is £320.94 a month per VW Finance (excluding the £1,886 deposit), so the allowance is a good option.

The employers NI at 13.8% on the car allowance is £300 x 13.8% x 12 = £496.80 so that’s cheaper the the Class 1A of £675.51

However, the employer losses the Capital Allowances and the Diesel would be cheaper if the employer purchased it.

Other points to be aware of are:

VAT http://www.hmrc.gov.uk/vat/managing/reclaiming/motoring.htm#6

H&S http://www.hse.gov.uk/pubns/indg382.pdf

It is also possible with the right advice to create a salary sacrifice scheme relating to car leasing, advisors such as Dave Hedges at http://www.edge-tax.com are experienced in these schemes.

In conclusion, in my opinion, it all depends on how much the allowance is (Car and Fuel)  and what car the employee needs (size and mileage), the only way to work out the best solution is by running the calculations to find out.

steve@bicknells.net