I am grateful to Bob Edwards of Landmark Professional Development for producing this clear guide on when you are required to complete a personal tax return.
Please click on the link below to access it:
If you need further guidance, please do not hesitate to contact us
Please find below a link to our Budget Summary covering the key points of George Osborne’s fourth Budget that affect small business owners and taxpayers.
TaxAssist Accountants budget_summary_2013_21 March 2013
Some of the changes were mentioned in last December’s Autumn Statement and earlier Budgets, but there were also many new announcements. The main highlights of the Chancellor’s speech were:
We hope that this summary is easy to digest and proves useful.
A further article with reaction from Jo Nockells of our technical team is on our web-site here
If any of the areas discussed seem likely to have an impact on your personal or commercial plans, please do not hesitate to contact us.
Following the recent announcements from HM Revenue and Customs, I am pleased to put forward our recommendations for tax-efficient wages and dividends for the year beginning 5th April, 2013.
If you are the owner of a limited company, the most tax-efficient remuneration package is an annual salary of £7,692 and dividends of £30,382 (profits allowing). This assumes you have no other income. At this level, you will have no income tax to pay. The limited company will have been taxed on the dividend income. Dividends in excess of this amount will be taxed as 25%.
There are some formalities about dividend vouchers and board minutes which we would be happy to advise on.
You may recall that last year we advised a salary of £7,600 and dividends of £30,933 – £459 more than we advising for this year. This is because the higher-rate income tax threshold has been reduced to take account of the increase in annual personal allowance from £8,105 to £9,440. National insurance thresholds have not benefited from the same increases as income tax thresholds. Annual wages between £7,692 and £9,440 will be subject to a combined national insurance charge of 25.8%, more than offsetting the Corporation Tax relief.
By substituting £1,748 of dividends for rents charged for a use of home office, an overall annual tax saving of £350 can be achieved. Please contact for more details if this suits your situation.
We have provided a simple summary of the measures recently announced. Please click this link:
autumn_statement to open the PDF file.
If you planning a large capital investment before 31st December, 2012, it is important that you take some advice.
If you want any further information on this or other matters, please do not hesitate to contact us.
In my previous article on this subject, I explained the opportunities and pitfalls in a employer providing a car to an employee. I explained the taxation effect of acquiring the vehicle either by outright purchase or on hire purchase.
One other commonly used option is for the employer to take out a lease contract to provide the car to the employee. Again, tax relief depends on a vehicles CO2 emissions and there are some changes planned for future years.
Currently, a business can deduct 100% of contract hire costs against business profits provided that the car’s Co2 emissions are 160g/km or less. There is a disincentive to taking out a lease for a car with higher emissions as legislation states that only 85% of the leasing cost of these cars is allowed against tax. This adjustment is made on the Corporation Tax computation. Please be aware that this restriction with apply to cars with emissions over 130g/km for leases signed after 1st April, 2013.
You will be aware that VAT is charged on contract hire charges. Where the vehicle is used for business purposes, 50% of the VAT (not all of it) can be reclaimed. Again, this is a common area of confusion. There is no distinction for VAT regarding CO2 emissions.
A common question about company cars is which is the best way of providing one to an employee – buy, take out an HP agreement or contract hire it. It is usually important to review a number of aspects of the business’s tax affairs in order to provide a clear answer.
I hope this article has given you some useful pointers on this subject. We would be happy to advise further.
In my next article, I will talk about the taxation of cars owned and used for business by sole traders and partners.
In this article and future articles, I aim to give you a brief overview of taxation of company cars.
In this article will deal with tax from the employer’s point of view.
I will provide details for a business providing a car to an employee (who may be a owner/director). Different rules apply to cars used by sole traders and partners.
I will use the 2012/13 tax rates. Significant changes will take place in future tax years and I will highlight this.
Low emission vehicles
A business buying a new car (outright or on hire purchase) with CO2/km emissions of 110g or less can set the entire purchase amount against its profit. When sold, the proceeds may be non-taxable if there are sufficient assets (including cars) in the general pool (18%).
From April, 2013 the threshold will reduce to 95g CO2/km. We would advise that businesses act before it is too late. This link will give you list of these vehicles
http://www.comcar.co.uk/newcar/companycar/poolresults/110tax.cfm
Cars with higher emissions
The tax allowances for cars with higher emissions are much less generous. Cars with CO2 emissions between 111g and160g CO2/km will be pooled with other assets and receive a writing down allowance of 18% per annum. Over 3 years, the business will receive 45% of the cars cost back in tax relief. Typically, a car loses 65-70% of its value in this period. This means that you will probably never get tax relief for this 20-25%.
From April, 2013 this CO2/km threshold will be reduced to 130g CO2/km. If you have a car in mind with emissions between 131g and 160g CO2/km, we suggest you act quickly.
Cars with CO2 emissions over 160g CO2/km go into their own pool and receive a writing down allowance of 8% per annum. Over 3 years, the business will receive 22% of the cars cost back in tax relief. Typically, a car loses 65-70% of its value in this period. This means that you will probably never get tax relief for this 43-48%. Shocking, isn’t it! These rules will apply for cars with emissions over 130g CO2/km with effect from April, 2013.
In my next article, I will outline the rules for leasing.
I hope you found this article informative. If you need further information including the double benefit of low emission vehicles, please do not hesitate to contact me.
We are often asked about the tax reliefs available for the costs incurred when working at home. In this and a previous article , I intend demistify this for you and, hopefully, help save you some tax (or at least stop you falling into some nasty hidden traps).
In the previous article, I explained the issues faced by a Director of a limited company when trying to claim tax relief to defray the costs of working from home.
The simplest route for a Director to obtain tax relief is to charge the limited company rent for the use of his own premises. There are formalities that need to be followed including a board minute and a formal rent agreement. The Director has to show this rental income on his self-assessment tax return but will be able to claim back the incremental costs incurred as a result of working from home. We recommend that the rent charged is the same as the incremental costs incurred as a result of working from home.
Sole traders and members of partnerships are able to claim tax relief (as a cost to their business) on the same basis on the self-employed pages of the tax return.
Calculating the incremental costs of working from home
You need to work out what rooms (or floor area) you use for business, and how much you’re using that room (or floor area) is for business use as opposed to private use. So lets say, you have 8 rooms and use 2 of them for business use 50% of the time. You will be able to claim 1/8th of your household costs as business costs (50% of 2 rooms = 1 room; total number of rooms 8).
Costs that can be claimed on this basis include:
Other costs you could claim include
The claim would be based on your estimate of business v private costs.
There is some very good guidance on the HMRC web-site.
I hope this is article is useful. Please do hesitate to contact us if you require further information.
We are often asked about the tax reliefs available for the costs incurred when working at home. In this and a number of future posts, I will demistify this for you and, hopefully, help save you some tax (or at least stop you falling into some nasty hidden traps).
Firstly, it is important to understand that there are different rules for
a/ employees, including directors with an employment contract
b/ directors without an employment contract (office holders)
c/ sole traders/partners
In this post, we are going to explain the rules for employees, including directors with an employment contract.
However, before we do this, we need to explain why there are different rules for Directors depending on whether or not they have an employment contract.
If you are a company director you are automatically an ‘office holder’ in law. You are not entitled to receive the National Minimum Wage for the work you do as an office holder. If you also have an employment contract, you will be entitled to the National Minimum Wage for the work you do under that contract.
For the 2012/13 tax year, the main rate of National Minimum wage is £6.08 per hour. This means that a Director with an employment contract must, in law, be paid £11,856 per annum (assuming a 37.5 hour week). That is way above our recommended tax-efficient 2012/13 Directors salary of £7,600 per annum. We, therefore, usually recommend that full-time Directors do not have an employment contract (and will not be able to claim the working from home relief outlined below – but please see later article for a method of claiming releif). If a Director works 24 hours per week or less, you should consider issuing an employment contract and subject to other considerations pay a salary of £7,600 p.a. Working Tax Credit issues may also need to be considered.
Section 316A ITEPA 2003
If you are employed specifically to work at or from home, and have no alternative but to do so, you may be able to get tax relief on some of your household expenses. Similarly, if you volunteer to work at home under a ‘homeworking arrangement’. A homeworking arrangement is an agreement with your employer that you’ll work at home on a regular basis. Evidence may be required by HMRC.
Tax relief can only be obtained by your employer making these payments free of tax and NI.
You don’t have to work at home every day but there must be a regular pattern – for example two days at home and three days in your employer’s premises each week. The work you do at home must be work that you’re required to do as part of your employment.
Typically HMRC will allow claims for:
You won’t be able to get relief on domestic expenses that you’re paying anyway – like your mortgage or council tax. You also won’t be able to get relief for expenses that relate to both business and private use – such as your telephone line rental, or Internet access.
From 2012-13 onwards, for payments of up to £4 per week, or £18 per month for monthly paid employees, you don’t need to provide any records of the household expenses you’re claiming relief for. For amounts above £4 you will need supporting evidence to show that the amount you are claiming is no more than the additional household expenses you have actually incurred.
This type of claim is most appropriate where a spouse is employed part-time to work at home on administration. The annual tax saving for a sole trader using the uncontested £4 per week rate will be £60 (at basic rate). OK its not a lot of money, but it is simple to claim.
Section 336 ITEPA 2003
For completeness, I have included tax relief claims using the above legislation. This is the only option available to the employee where the employer does not pay a tax-free allowance.
Quoting from HMRC “Before a deduction can be permitted for a household expense it must be demonstrated that the expense has been incurred wholly, exclusively and necessarily in the performance of the duties of the employment…….. HMRC accept that those conditions are met where the following circumstances apply:
As I said, any claim here faces some very difficult hurdles.
I really hope this helps. Please watch out for future articles and, as always, if you need further advice do not hesitate to call us.
I am often asked whether VAT can be claimed back on employee’s mileage claims. This includes owner-managers who trade through a limited company and use their own vehicles for work purposes. The answer is yes…but you can only claim some of the VAT back. Mileage claims are most commonly paid based on HMRC’s authorised mileage rates (45p for the first 10,000 miles in the tax year and 25p thereafter). VAT cannot be claimed on the whole payment, but can be claimed based on the relevant HMRC fuel-only rate for the car in question.
Please click this link to get the current rates.
The easiest way to manually calculate the amount of VAT that can be claimed is as follows:
1/. Find the current HMRC advisory fuel rate for your vehicle (the table is based on engine size and fuel type)
2/. Divide this figure by 6 (whilst the standard rate of VAT is 20%)
3/. Multiply the figure in 2 by the number of miles claimed.
So if an employee is paid 45p per mile for 60 miles, the amount paid to the employee is £27.00. If the car is a 2000cc diesel (advisory fuel rate = 15p per mile), the amount of VAT that can be claimed is £1.50 (60 miles times 15pence divided by 6). For your VAT records, the goods amount is £25.50 with £1.50 VAT.
We do have an app for the iphone and ipad that will do this calculation for you. Please see the link below.
http://www.taxassist.co.uk/mobile-apps.php
I hope you find this information useful. Please do not hesitate to contact us if you need any further information.
We have developed a number of useful guides on various practical and theoretical issues which may affect your business.
A full list can be accessed by clicking on the link below. You can then select and request the guides you are interested in.
Index to our tax and business helpsheets
We hope you find this useful.
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