Newsletter May 2014

Welcome to this month's newsletter

This month’s newsletter provides company car drivers with a few ideas to save tax; news about HMRC’s intention to open up access to tax data; details about the pension decision period extension; and advance warning of changes to certain VAT place of supply rules.

Our next newsletter will be published Thursday 5th June 2014.

Cars, business use, and tax considerations

There are a number of situations where care should be taken in the way in which claims are made for the business use of a vehicle, usually a car, which is also used for private purposes.

We have listed below a number of issues that business owners and private car users should be aware.

• If you are self-employed and your business assets include a car you should be reducing your claim for capital allowances, loan and HP interest and running costs based on your private use of the vehicle. The percentage added back should be based on a record of your private and total mileage. On enquiry, HMRC are unlikely to accept a private or business use percentage unless it is backed up by a detailed mileage log.
• Alternatively, if you are self-employed, and if your business turnover does not exceed the VAT registration threshold (currently £81,000) you can use the fixed mileage rates referred to below. These do not cover loan interest and this can also be claimed subject to restriction for private use based on private and total mileage for the period claimed.
• If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allows you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter) and the number of miles you claim. The 45p/25p rates are the maximum claim HMRC will allow. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.
• If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Usually, the cost of any such reimbursement will be lower than the tax charge created by the benefit-in-kind assessment. The reimbursement can be calculated using the ‘advisory fuel rates’ on HMRC’s website and you will need to log your private mileage.
• If your company provides you with a company car, and if you use the vehicle for business and private purposes, then you will be taxed on the deemed benefit. The amount of the benefit-in-kind charge will depend on the CO2 emissions of the vehicle you use. The rates of benefit vary between 0% and 35% of the list price of the vehicle when new. If you presently drive a car with a high CO2 rating you may want to consider trading it in for a lower CO2 rated model. 

You will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:

• Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.
• The business miles claimed should not be rounded.
• Home to work mileage should be excluded.

HMRC may be extending access to taxpayers’ data

The Treasury has confirmed it was proceeding with plans to legislate making aggregated and anonymised data more widely available. In a published document HMRC said:

"The government has decided to proceed with the proposal to remove the legal restrictions that currently limit HMRC's ability to share anonymised individual level data for the purpose of research and analysis and deliver public benefits wider than HMRC's own functions, but they accept that this must be done only where there are sufficient safeguards in place to protect taxpayer confidentiality.

HMRC is committed to protecting its customers' information. We shall be consulting further on implementing the proposals for sharing anonymised data, and would only take forward specific measures where there was a clear public benefit and subject to suitable safeguards."

A number of politicians and academics have reacted badly to this news.

The data shared could include details about income, tax arrangements and payment history. According to government sources the data would be cleansed of personal contact details of taxpayers.

Pension decision period extended

Last month we touched on the changes that HMRC is introducing to the treatment of defined contributions pensions. HM Treasury has now issued the following update that clarifies the position of people who have recently taken a tax-free lump sum from their defined contribution scheme.

“The government has announced today (Wednesday 9 April) that people who have recently taken a tax-free lump sum from their defined contribution pension will be given 18 months rather than 6 months to decide what they wish to do with the rest of their retirement savings, and will not be put at a disadvantage should they wish to wait to access their pension savings more flexibly.

This follows an announcement on 27 March confirming that the government would take action to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required to make a decision regarding their pension, either by buying an annuity or entering into capped drawdown.

Currently, if this is not done, the lump sum is then taxed at 55%. This extra time will allow people to make the right decision for their pension.”

Exchequer Secretary to the Treasury, David Gauke, said:

“At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly. However, we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the budget.”

VAT Mini One Stop Shop (MOSS)

Currently, the place of taxation for broadcasting, telecommunications and e-services (BTE) supplies is determined by the location of the supplier of the services. However, from 1 January 2015, the place of taxation for private consumers will be determined by the location of the consumer.

Business to business supplies are unaffected; this change will only concern suppliers of BTE services to private consumers.

To save you having to register for VAT in every EU Member State where you supply BTE services, you may opt to use the VAT Mini One Stop Shop online service (VAT MOSS). This will be available on 1 January 2015, but you will be able to register to use it from October 2014.

For example, if you register for the VAT MOSS online service in the UK, you will be able to account for the VAT due on your business to private consumer sales in any other Member States by submitting a single VAT MOSS return. This will include any related payment to HMRC. HMRC will send an electronic copy of the appropriate part of your VAT MOSS return, and the related VAT payment, to each relevant Member State's tax authority on your behalf. The VAT rate used will be that of each Member State of Consumption at the time the service was supplied.

The changes in the underlying VAT place of supply rules are complex. If you feel you may be affected please contact us at an early date so we can advise you on any alterations, if any, you will need to make to your record keeping systems.

Tax Diary May/June 2014

1 May 2014 - Due date for Corporation Tax due for the year ended 31 July 2013.

19 May 2014 - PAYE and NIC deductions due for month ended 5 May 2014. (If you pay your tax electronically the due date is 22 May 2014.)

19 May 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 May 2014.

19 May 2014 - CIS tax deducted for the month ended 5 May 2014 is payable by today.

31 May 2014 - Ensure all employees have been given their P60s for the 2013-14 tax year.

1 June 2014 - Due date for Corporation Tax due for the year ended 31 August 2013.

19 June 2014 - PAYE and NIC deductions due for month ended 5 June 2014. (If you pay your tax electronically the due date is 22 June 2014.)

19 June 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 June 2014.

19 June 2014 - CIS tax deducted for the month ended 5 June 2014 is payable by today.