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Travel and Subsistence Expenses

Jan28

PThere are two ways to deal with Travel and Subsistence expenses for business travel:

  • An employer pays their employee for the Travel and Subsistence expense incurred, tax-free
  • The employee claims reimbursement via their tax return for any tax relief due

Claiming expenses for a business journey On a normal working day, mileage from home to office cannot be claimed.   An example of a business journey is if an employee travels from home to see a client, in this case 40 miles away. Even if they travel near to their office location, the full distance of 40 miles can be claimed…. Continue Reading

VAT and Indirect Exports Change

Jun11

When you export goods to a country outside the EU the goods are ‘zero-rated’ for VAT purposes, which means you do not apply VAT to the value of the goods. However, you need to have the paperwork to prove that the goods left the UK.

If your customer does the physical exporting, in that they take possession of the goods in the UK and handle the shipping, this is called an ‘indirect export’. HMRC has previously only allowed you to zero rate the goods in this situation if your customer was an ‘overseas person’ – they had no VAT registration in the UK and no business establishment here. Also the goods must leave the UK within three months of the handover date.

From 1 October 2013 the rules for indirect exports have been relaxed slightly. Now you can zero rate the goods for export to a country outside the EU even if your customer is VAT registered in the UK. However, the customer must still not have a business established in the UK.

This change in the rules has been brought about due to pressure on the UK to comply with EU rules. It is thus effectively back-dated for four years. If you believe you have applied VAT in the last four years when under this change of rule it would not apply, you can reclaim that VAT. However, HMRC will expect you to pay back any reclaimed VAT to your customers who original bore the VAT on the goods.

We can help you check that you have the VAT position on any exports 100% correct.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

VAT on Sale of Commercial Buildings

Mar24

When purchasing or selling a commercial property one of the first things to establish is whether VAT will be applied to the price of the property. Land and buildings are generally exempt from VAT, but ‘new‘ commercial property (i.e. less than three years old) will have VAT applied. Otherwise VAT should only be charged on the sale of a commercial property where the seller has previously elected to apply VAT to the property. This election is known as the ‘option to tax‘. There are circumstances where the option to tax may be disapplied by the seller, such as where the purchaser is going to use the building solely for charitable purposes or the building will be converted into residential use. If there is any question that VAT should not be applied to the sale, the seller must ask the purchaser for written confirmation of the intended use of the building. When the purchaser plans to convert the building to residential use it must provide the seller with a VAT certificate (form VAT1614D) to confirm their intentions for the building. In other circumstances a written instruction from the purchaser should be sufficient. Where VAT is applied to the price of the building, the stamp duty land tax (SDLT) charge will inevitably be higher, as SDLT is charged on the gross consideration paid, including the VAT charged. If you are planning to purchase a commercial property, or sell one, ask us to check the VAT implications before the price is agreed.

Disclaimer

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Child Benefit if Your Child is 16 or Over

Mar19

If you have a child aged 16, check whether you are still receiving all the child benefit and child tax credits you expect to.

Child benefit and child tax credit both stop automatically on 31st August on or after the child’s 16th birthday, but where the child is in approved education or training, the parent who claims the child benefit is entitled to extend that claim until the child reaches their 20th birthday. ‘Approved education’ means at least 12 hours of supervised study per week, and the training can include an apprenticeship.

From September 2013 children who live in England (the rules are different in Wales, Northern Ireland and Scotland) are required by law to remain in education or training until the end of the academic year in which they turn 17. So there are a lot of families out there with 16 years olds who are in approved education, but who have lost their child benefit.

If you are one of those parents, and you want to continue to receive the child benefit, you need to contact the Child Benefit office at HMRC, to inform them that your child is still in approved education or training.

Similar rules apply for child tax credit. In that case the claimant must contact the Tax Credit office.

Although child benefit and child tax credit are both administered by HMRC, you need to inform them twice, as one section of HMRC cannot pass the relevant information to another part!

You may prefer not to receive the child benefit if you or your partner/spouse earns £50,000 or more, because in that case all or part of the child benefit paid to your family is clawed-back through the operation of the high income child benefit charge (HICBC). HMRC has written to some of the parents who may be due to pay the HICBC, but not all, as they cannot correctly identify every person who may be liable to pay the charge.

If you are the highest earner in a family that has claimed child benefit since 7 January 2013, and your total income is £50,000 or more, you need to declare that child benefit on your tax return form. If you don’t normally complete a self-assessment tax return form, you need to ask HMRC to set you up on the self-assessment tax return system. We can help you with that, but don’t delay, as if you fail to complete the tax return form on time there will be automatic penalties to pay.

 

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If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Contractor Loan Schemes

Mar17

Have you taken part in a contractor loan scheme? This is a tax saving scheme which was widely sold to workers in personal service industries, such as IT contractors. To use the scheme the individual would sign an employment contract with an offshore employer, but work for customers in the UK. The individual would often receive a large proportion of their fee for that work as a loan from the offshore employer. They were told the loan was not taxable, except for a small benefit in kind charge on the unpaid interest on the loan, but that’s not what the Taxman thinks. The Taxman has publicly announced that he is opening tax enquires into individuals’ tax returns for periods during which they have used such loan schemes. In some cases the individual will receive a tax bill for the years 2008/09 to 2010/11, to collect the tax they think was avoided. There will be penalties and interest to pay on any tax found to be avoided.
If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

New Employee Shareholder Status

Mar12

The Government thinks that employees who own shares in their employing company feel more involved in that business and hence are happy and loyal employees. So it has introduced a new share scheme from 1st September 2013 which allows you, as an employer, to give your employees tax-free shares in your company, but in return the employees must give up some key employment rights. How does this work? The employee must sign a fresh employment contract called an ’employee shareholder’ contract, then they must be issued with shares worth at least £2,000 (and up to £50,000) in their employing company. When the individual sells those shares any gain arising on that disposal is completely exempt from capital gains tax. However, any gain up to £10,900 (for 2013/14) would be tax free anyway. Normally where shares are awarded to an employee their value is treated as taxable income for that employee, unless the shares are issued under an approved share scheme. In this case the first £2,000 worth of shares awarded will be free of income tax and NIC, but not any further shares. The downside is the employee must surrender all of following rights to take up employee shareholder status and receive the free shares:

  • compensation for unfair dismissal, apart from when this is automatically unfair or relates to anti-discrimination law;
  • request for time off for studying or training;
  • request for flexible working; and
  • statutory redundancy pay.

Also the employee must give 16 weeks’ notice (instead of 8 weeks) when returning from maternity or adoption leave. This sounds like an attractive deal for an entrepreneur who doesn’t care about his own employment rights. However, any person who holds 25% or more of the company (alone or with associates) can’t take up employee shareholder status and enjoy the tax-free shares. So this share scheme can only be used to give shares to employees who don’t already have a significant share in the company. Before implementing this scheme you should take employment law advice, and specialist advice on how to value your company’s shares. The employees should also take independent advice before signing away their employment rights, but you, as their employer, can pay for that advice with no tax consequences.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

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Question and Answer – Mileage

Mar10

Q. My company pays me the regular mileage rate of 45p per mile for business journeys I make in my own car. However, to reach certain customers I need to drive on mainland Europe which requires extra car insurance which is quite expensive. Can my company reimburse me for the cost of that extra insurance without any extra tax?

A. The regular mileage rate is supposed to cover all the marginal costs of using your personal car for business, including insurance. So if the company reimburses you for the extra cost of this insurance in addition to the mileage payment, that would be a taxable benefit in kind.

We need to look at the distances you are driving in Europe, and for what periods. If the time spent abroad is relatively short, it may be more economical for the company to hire a car for you while you are abroad. However, there is no substitute for crunching the numbers.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

Question and Answer – VAT Reclaims

Mar5

Q. I need to get a high-end computer for my business which will cost about £2,200, but I use the VAT flat rate scheme for small businesses which doesn’t allow VAT reclaims. I’ve heard that I can claim back VAT charged on expensive items under the flat rate scheme, is that true?

A. Yes, under the flat rate scheme you can claim back VAT charged on the purchase of capital goods, which are items you will use in your business over a number of years. It must be a single purchase from one supplier with a VAT inclusive total of at least £2000, but that invoice can include several items bought together such as; screen, computer, and printer. The items must not be purchased for resale or for lease or hire.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Question and Answer- Bailiffs

Mar3

Q. Please help, I’m so worried. I’ve received several threatening letters from the Taxman demanding money, but I’m sure I’m up to date with my tax payments. I’m terrified the bailiffs will turn up on my doorstep and demand payment. What should I do? A. Let us see the Taxman’s letters and we will try and sort the matter out for you with the Tax Office. In the meantime, keep this number to hand: 0300 200 3862. If bailiffs do turn up ask to see their photo ID cards, take a note of the ID numbers and call that number to confirm whether the bailiffs are genuine. Also collect evidence of the tax payments you have made recently, such as bank statements. These may be enough to prove to the bailiffs that you have paid the tax you owe. If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Pension Lifetime Allowance

Feb26

The Government want us to save enough so we can each draw an adequate pension in retirement, but if you save too much you will be stung with a 55% tax charge when you draw your pension. The boundary between ‘enough’ and ‘too much’ savings is set in law by the lifetime allowance, which is a value of your total pension savings at retirement. This allowance will be reduced from £1.5 million to £1.25 million on 6 April 2014.

To give you an overview on these seemingly high numbers: an annual pension of £75,000 for a man aged 65 at retirement, today requires a pension fund of roughly £1.5 million. A pension fund of £1.25 million would deliver an annual pension of about £62,500 to the same person. If you contribute to a defined contribution pension scheme (the most common type), the value of your pension fund will be shown on your annual pension scheme statement.

If you are a member of a final salary pension scheme it will promise to pay you a pension equivalent to a percentage of your final salary. That could be as much as 2/3rds of your final salary. Work backwards from your current salary to get a rough idea of how much your pension fund may be worth. Your pension scheme trustees will be able to give you more accurate figures.

Once you have those figures, you can judge whether you need to elect to fix your lifetime allowance at its current level of £1.5 million, where your pension fund already exceeds £1.25 million. This is known as ‘fixed protection 2014’, and you need to apply to HMRC to do this before 6 April 2014.

Once fixed protection 2014 is obtained you won’t be able to make any further pension contributions to a registered pension scheme. If you are a member of an occupational pension scheme which receives automatic contributions on your behalf, you will have to opt out of that scheme or lose the fixed protection.

After 6 April 2014 there will be another way of protecting your pension fund, called ‘individual protection 2014’. This will fix your lifetime allowance at the value of your pension rights as at 6 April 2014, up to a maximum of £1.5 million. You should discuss with your financial adviser which type of pension protection is best for you.

 

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If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.