Replacing Company Cars
Q: Two of our company cars need to be replaced in the next few months. We are aware that you can get 100% first year allowances on cars that have less than 120g/km of carbon dioxide emissions. Is this still available under the new capital allowance regime from April 2008?
A: The results of a long consultation process, the rules for capital allowance on cars were announced in the 2008 budget in March, and this confirmed the proposed changes as follows:
Up until April 2008 cars with emission up to 120g/km CO2 will get 100% first year allowance.
From April 2008 to 31st March 2013 cars up to 110g/km CO2 will get 100% first year allowance, cars from 111g to 160g will attract a 20% writing-down allowance, and those above 160g will only get a 10% WDA. This confirmed that cars in the 111 to 120 g/km CO2 range will fall out of this "very low" bracket from April 2008.
Should you purchase a low emmission car of up to 110g/km, one benefit for the employees who use it is that it will benefit from reduced company car tax from of 10% for a petrol vehicle and 13% for a Diesel.
If you are considering leasing these vehicles, remember that there are rules disallowing a proportion of car lease rental payments for tax purposes, and these have been reformed along the same lines, so please ensure you speak with your local TaxAssist Accountant before deciding on how you will purchase these vehicles.
Parking Issues for Employees
Q: Our factory has a very small car par park and we are looking at ways to encourage the staff not to use it; if there were any tax benefits this would be a bonus.
A: There are number of things you could do. Firstly you could provide a works bus to transport staff to from work from home but you could also provide a bus on a working day to go to shops or other amenities provided the journey was no more than ten miles. Provided this was available to all staff there would be no benefit in kind assessment. Secondly you could designate certain days as cycling days and provide a tax free meal to those who participated. Originally this was limited to six days per year but is now unlimited.
Using Personal Mobiles for Business Use
Q: Due to the nature of my business some of my employees are required to be on call 24 hrs per day, and consequently use their personal mobile phones to make business calls. How should I reimburse these employees for the cost of the business calls they make?
A: Where this is the case, Class 1 NIC’s and tax are payable via PAYE if you;
1. reimburse the cost of the mobile telephone, service charges or the cost of private calls
2. provide the employee with a voucher for use in relation to the mobile telephone or private calls made on it.
Where you reimburse the costs incurred by an employee in making business calls only on his or her own mobile telephone, you can ask for a dispensation. If you do not have a dispensation you must return the full cost to you on form P11D at section N. No Class 1 or Class 1A NIC’s are payable.
An alternative option you have is to provide these employees with a mobile telephone and enter into a service agreement with the telephone company there is no liability for NIC’s or tax. This applies to the provision of the telephone, the service and all calls.
Enhanced Capital Allowance Claims
Q: We are refurbishing our offices and someone mentioned that we could claim Enhanced Capital Allowances on the water and sanitary fittings. Do you know what he meant by this?
A: When you equip a building with items like those you mentioned, the cost cannot be written off against profits immediately. You are able to claim Capital Allowances on the expenditure which effectively writes off the expenditure over a number of years.
The Enhanced Capital Allowances has continued under the revised Capital Allowances system from April 2008. This allows you to write off the whole of the expenditure on certain qualifying items in the year of expenditure rather than claiming it over a number of years
A list of qualifying equipment and fittings is available on www.eca.gov.uk.
School Fees and Gift Aid
Q: I am thinking of sending my youngest son to a private school. The school fees are going to be in the region of £12,000 per annum and on the correspondence I have recently received I noticed the school states that it is a registered charity. Does this mean that the payments I make for the fees each year qualify for tax relief under gift aid?
A: The school has become a registered charity so it can reclaim basic rate tax on the donations it receives on qualifying gift aid payments made from United Kingdom resident individuals and companies.
Unfortunately, outright payments to a charity in return for services, rights or goods are not gifts, and do not qualify for gift aid.
HM Revenue & Customs specifically state in their gift aid guidance booklet that “Payment of school fees for a specific person do not fall within the gift aid scheme” so your £12,000 will not qualify for relief.
Previous Accountant holding on to records
Q: I recently changed my accountant, but am having difficulty obtaining my books and records for the previous year, together with copies of my accounts and tax return. One of the reason I left was due to their fees! Is this something to do with it?
A: On the assumption that your previous accountant had made it clear to you at the outset what his charging structure would be, and you agreed to his terms, then yes, your accountant is perfectly entitled to retain your records while his fees are unpaid (technically, the right to retain records is called a lien).
You would have to show that he was negligent or dishonest in his dealings with you to avoid that result. You can request his Professional Institute to get involved if you feel you have been overcharged, and they may review the case. You can also ask the Institute to pressure him to return your records.
Your new accountant can also write to the old ones advising them that the retention of records may prevent the completion and submission of your returns for the deadline. They could also mention that this may result in penalties or interest being incurred as a result of their refusal and they could be held responsible for meeting these.
Temporary Employment in the UK
Q: I am currently on a working holiday for approximately 5 months over the summer months at a holiday camp in the UK. My employers advised that I would be paying UK income tax on this employment income. I thought I wouldn’t have to pay any tax in the UK, as I am Australian and only here for 5 months? Can I claim this tax back when I leave?
A: As a UK based employee you will be subject to the standard deduction of Income Tax and National Insurance under the UK PAYE system.
Before you leave the UK you should obtain a form P85 from the Revenue & Customs. As you are a commonwealth citizen you can claim the normal UK personal tax allowance, which for the 2008/09 tax year was recently increased to £6,035. This allowance will refund some or all of the UK tax that you have suffered from the 6 April to the date of departure from the UK.
Private Hire Vehicles
Q: I have started a taxi business aiming at the executive market this month. I have purchased a new vehicle for a total cost of £50,000 that is exclusively used in the business on the same date. How is the cost dealt with for tax purposes?
A: The total cost of the vehicle will qualify for Capital Allowances, and assuming it is a qualifying hire car it will qualify as Plant and Machinery. Up until April 2008 First Year Allowances were available on the cost of the vehicle in the period the vehicle is acquired. As the vehicle was acquired after April 2008 it will qualify under the new Capital Allowance system, in which small business are entitled to Annual Investment Allowance.
This will effectively allow businesses to claim relief in full for up to £50,000 Plant & Machinery assets acquired in the year. The annual investment allowance however, does not apply to cars, so we would recommend you speak to your accountant to confirm if the definition of a qualifying hire car pre April 2008 (a car provided wholly or mainly for hire to or the carriage of members of the public in the ordinary course of a trade and satisfies one of the three conditions outlined on the HMRC website) is still relevant to the new system.
Name of Limited company
Q: I wish to start a new business and form a Limited Company to do this. I have come up with a good name and want to use the word British to give the company some substance. Can I do this without anyone objecting?
A: Approval of the word British in your company name will depend on how it is used. Normally the Secretary of State would expect the company to be British owned. You would need to show that the company is pre-eminent in its field by providing supporting evidence from an independent source such as a Government department or a trade association.
If the word 'British' is qualified by words that do not describe an activity or product, for example by using a 'made-up' word, then evidence of pre-eminence is not necessarily essential. However you would be expected to show that your company is substantial in relation to its activity or product and that it is eminent in its own field.
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