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Archives for August 2017

WHEN IS A VAN NOT A BENEFIT?

A company van is a useful asset for many businesses, but depending on how it is used, the employee using the van may need to pay what Her Majesty’s Revenue and Customs (HMRC) refers to as a ‘Benefit in Kind’ tax.

If the company van is used mainly for work and for insignificant private purposes, there is no requirement to report to HMRC because there will be no tax to pay on the use of the van. This is also the case if the van is used as a pool van, which is where more than one employee uses the van and it is not usually kept at an employee’s home.

If, however, the van is used for personal purposes beyond what HMRC regard as insignificant private use, then you will need to report to HMRC and the employee will be liable to pay a Benefit in Kind tax. Tax will also be due on the fuel used for private journeys.

HMRC have made it clear that private usage of a company van will be insignificant and exempt from taxation only where such use is incidental to the business use. One particular example of an insignificant use which they provide is when making a slight detour to pick up a newspaper on the way to work.

How much tax will be charged on the van and fuel?

For the 2017/2018 tax year, employees within the 20% tax bracket are liable to pay a flat rate tax of £3,230 on the van benefit and £610 tax for fuel used for private journeys. The employee could pay less tax, for example, if the employee cannot use the van for 30 days in a row.

Please contact us if you would like any further guidance. SRB Associates (Leicestershire) Limited, a firm of accountants in Melton Mowbray.

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HMRC’S SUPER COMPUTER WILL FIND ERRORS IN TAX RETURNS

Following an investment of over £100m, a new supercomputer called Connect means the HMRC will have access to a lot more information about the tax payer than they typically would – information that goes far beyond the details we submit on tax return forms.

Connect allows the HMRC to gather details from a number of sources, including your bank and a wide range of financial organisations, such as PayPal. If that’s not scary enough, it goes even further, assessing our digital footprint – looking at our internet activity to identify whether or not there are any inconsistencies with the numbers we declare to the HMRC, and our spending on websites like Airbnb and eBay. If you spend more than you earn, then a red flag is raised against your name.

In fact, going one step further, a change in law now means any tax payer who does not declare any income from overseas and earnings from offshore accounts is now committing a criminal offence. It seems ignorance won’t be tolerated either, with financial penalties in place for anyone providing inaccurate data or forgetting to include vital information such as student loans.

At £100m, Connect is not cheap, and those behind it will be looking to make a serious return of investment.

Remember, the HMRC’s knowledge now goes beyond what we tell them, they have access to more information and data than ever before – even going as far as our spending habits – so it’s time to take extra care when you next fill out your tax returns. Or if you’re like thousands of tax payers across the UK who are now taking advice from professional accountants from Melton Mowbray to Manchester, SRB Associates (Leicestershire) Limited are now offering expert advice on every aspect of your tax returns. We can ensure you’re not committing a criminal offence as well as helping you pay less tax, too.

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UNDERSTANDING IR35

If you are reading this article you may be wondering what IR35 means for you or you may just want to gain an understanding of IR35. We aim to set out the main elements to IR35 below:

What is IR35?

IR35 is a set of tax avoidance rules the UK Government introduced in April 2000. The Government introduced IR35 due to concerns that some employees were taking on roles as contractors working through limited liability companies in order to gain tax benefits when in actual fact they were still carrying out the same role of an employee with the employer in question.

IR35 does not apply to all contractors and freelancers. It only applies to those who are not genuine contractors but are rather “disguised employees” trying to pay less tax than required.

Who falls under IR35?

You will need to seek independent legal advice on this particular issue. As a general overview, there are a number of factors you will need to consider, some are:

• You and the employer should have the right to terminate the contract immediately.

• How much control do you have over your working practices and arrangements? The more control you appear to exercise over your work and working patterns, the less likely you will fall under IR35.

• How much benefits does the employer provide you? If the employer provides you with any employee benefits such as holiday pay, pension contributions and insurance cover you are more likely to be regarded as a disguised employee.

From April 2017, public sector bodies engaging contractors are now required to decide whether that contractor is genuinely self-employed.

Would you like to discuss IR35 or other taxation matters further with us? Our team of expert accountants in Melton Mowbray are available to assist with any uncertainties.

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WHAT YOU NEED TO PAY AS A SUBCONTRACTOR

The Construction Industry Scheme (CIS for short) is a tax deduction scheme that can help sub-contractors in the construction industry pay less tax. In simple terms, it involves tax being deducted at source from payments related to construction work. It is important to note that employees cannot be covered by this scheme due to them being part of the PAYE system already for tax purposes.

The Construction Industry Scheme applies to payments from the main contractor to the sub-contractor. There are three tests the sub-contractor must pass in relation to turnover, business and compliance along with registering with HMRC officially. If all this is done, the sub-contractor will receive gross payments from the contractor.

Even if the three tests are not passed, the sub-contractor can still register with the HMRC for CIS payments but at a lower level of 20% rather than purely gross payments. This is still lower than the usual 30% though and so worthwhile for many sub-contractors.

The Construction Industry Scheme payments apply for any payments made under a construction contract and is relevant where one party is the contractor and the other the sub-contractor. It is also important to remember that some payments are exempt from the Construction Industry Scheme guidelines. A simple example of this is that of a business that is not in the construction business but pays for building work on a property it owns and uses for their own business purposes. This would not be eligible to make a CIS payment against under the rules of the Construction Industry Scheme.

If you need an accountant Melton Mowbray or need more advice on the CIS then get in touch today and let us help you with your query. Our professional team is on hand for any help or advice you might need.

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OUR TOP 10 TAX DEDUCTIONS TO REDUCE YOUR TAX BILL

We pride ourselves on being the best accountant Melton Mowbray has to offer. The question we get asked the most is, how do we pay less tax? If you are not currently staying on top of all possible tax deductions you may be overpaying. Here are our top 10 tax deductions to reduce your tax bill:

1. Home offices

If you work from home and use a room as an office, you can work out the percentage of space used and the business can then pay for its portion of your home costs.

2. Cars

If you use your car for business purposes, the allowance is 45p per mile, alongside claiming for car parking and toll roads. If you do not have a car you can also claim for travel costs via public transport.

3. Equipment

Anything you need to purchase to carry out the duties of your line of work is a business expense, this includes: laptops, printers, software and office furniture.

4. Refreshments

If you are away from your usual place of business to work, you can claim for your meals and drinks.

5. Uniform

If you require specialist clothing which cannot be worn for personal use or business branded clothing, this is a business expense.

6. Costs

If your business has to pay costs for bank accounts, membership fees, training costs and subscriptions you can offset these against your tax bill.

7. Christmas party

If you regularly hold a Christmas party, you can allow a cost of up to £150 per employee.

8. Pay early

If you are able to pay your tax bill early, HMRC will pay you some of the amount back in the form of interest.

9. Employ family

The personal allowance of £11,000 tax free income could be utilised to the benefit of your business if family members can carry out work related duties.

10. Pay professionals

If you are currently trying to perform many different roles, hire people to do it for you. Employees are a business expense and they could help you make more money.

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HOW TO EXTRACT CASH FROM YOUR LIMITED COMPANY

One of the biggest challenges most small businesses owners face at some point in time is working out how and when to extract money from the business itself. Also important to think about is how to record any personal withdrawals you make in the best and most tax-efficient way.

If you are unsure as to how to do the above, the best thing to do first is estimate how much cash your business is likely to make in the next year. This can be incorporated into your business plan and is done by looking at expected revenue and then deducting any operational costs and any corporation tax you may need to pay. Remember to take into account any interest on bank debts you will pay too and any inventory costs if you are a retailer or manufacturer.

Once you have worked this out, then the easiest way to take money from your business is by paying yourself a salary and any balance as a dividend. If you set the salary you take to your personal tax-free earning allowance, then you can use a dividend for any extra you take to make up the overall balance.

To be able to take money out like this, you will need to be registered officially as an employee if you aren’t already. Once this is done, you can work out the proportion of the overall yearly figure that you will take as a monthly salary according to your tax-free allowance and use a dividend for the rest each month as described above.

If you need any more advice on this or general information on how to pay less tax, then we are the best accountant in Melton Mowbray to call. Let our professional team guide you and help resolve your query fast.

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