Archive for September, 2019

Getting ready for EU exit 31 October 2019

Thursday, September 26th, 2019

HMRC has published a check list of issues you will need to deal with prior to 31 October 2019.

The check list has been sent to all businesses that already trade with the EU or the rest of the world.

The text of the letter is reproduced below, and this contains the links to the step-by-step guides.

We can provide assistance with the implementation required, please call if you need help.

Letter from HMRC:

We are writing to you because our records show that you are a VAT registered business and you trade with the EU and the rest of the world. This means that you will be affected by changes when the UK leaves the EU on 31 October 2019.

As you already trade with countries outside the EU, you’ll have a UK Economic Operator Registration and Identification (EORI) number starting with the letters ‘GB’. You will need this for importing and exporting when we leave the EU.

If you deal with the customs processes of EU Member States, you may need to get an EU EORI number too. Find out if you need an EU EORI by reading our EORI myth buster, go to www.gov.uk/government/publications/hmrcbrexit-communications-resources.

Next steps you need to take to get ready for Brexit

Once you have your EORI number starting with ‘GB’ there is more that you can do to get your business ready. You can:

  • use the checklist overleaf to start working through the actions and decisions that you need to make now
  • go online to find more detailed step by step guides – for importers, go to www.gov.uk/prepare-import-to-uk-after-brexit – we recommend that you talk to the person who helps you with customs declarations now – for exporters, go to www.gov.uk/prepare-export-from-uk-after-brexit – focus on understanding what information you’ll need to give to the person you are selling to, so that they can complete the transaction
  • keep up-to-date with the latest Brexit news, including details of upcoming webinars we are running on importing and exporting with the EU after 31 October – register for our free email update service, go to www.gov.uk/hmrc/business-support and select ‘business help and education emails’, then select ‘Brexit’

With just over one-month to go before the current Brexit deadline, we recommend that you access the check lists and work through the issues raised. The temptation to wait and see what happens should be resisted as this could leave you exposed if we do exit at the end of October.

Can you claim back the VAT when you buy a car?

Tuesday, September 24th, 2019

The short answer to this question is a resounding “no”, but as always with tax, there are exceptions.

Obviously, if you are in business and not VAT registered, you cannot reclaim the VAT added to any of your purchases. If you are VAT registered HMRC has published the following guidance for VAT recovery when acquiring or leasing a company vehicle:

Buying a new car

You may be able to reclaim all the VAT on a new car if you use it only for business. The car must not be available for private use, and you must be able to show that it is not, for example it’s specified in your employee’s contract.

‘Private use’ includes travelling between home and work, unless it’s a temporary place of work.

You may also be able to claim all the VAT on a new car if it’s mainly used:

  • as a taxi
  • for driving instruction
  • for self-drive hire

Leasing a car

If you lease a car, you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used:

  • as a taxi
  • for driving instruction

Self-drive hire cars

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge. If you hire a car for another reason (for example you do not have a company car), you can reclaim all the VAT if all the following apply:

  • you hire it for no more than 10 days
  • it’s used only for business
  • it’s not available for private use

Commercial vehicles

You can usually reclaim the VAT for buying a commercial vehicle (like a van, lorry or tractor) if you only use it for business. If they’re used only for business, you can also reclaim VAT on:

  • motorcycles
  • motorhomes and motor caravans
  • vans with rear seats (combi vans)
  • car-derived vans

A further restriction in your ability to recover the VAT on a vehicle purchase applies if you purchase a second-hand car and the dealer selling the car uses the VAT margin Scheme. The invoice for the car purchase will clearly show when this is the case. To recover VAT, it must be shown on the seller’s invoice.

How much tax do you pay on your dividends?

Thursday, September 19th, 2019

If you own a small limited company your shares entitle you to draw a return on your shareholding – in common parlance these returns are called dividends.

A company can only pay dividends if it has current or accumulated tax-paid reserves. For most smaller companies this will be described as reserves or retained profits on your company balance sheet.

As these reserves are made up of retained profits after corporation tax has been paid, if you take a dividend the underlying profits have already been taxed at 19% – the current corporation tax rate. Unfortunately, when you receive the dividend this is deemed to be taxable income; and will be subject to further, hybrid rates of Income Tax.

For the tax year 2019-20 the rates of dividend tax applied are:

  • The first £2,000 of dividends received are tax-free.
  • Dividends that fall to be taxed as part of your basic rate Income Tax band are taxed at 7.5%.
  • Dividends that fall to be taxed as part of your higher rate Income Tax band are taxed at 32.5%, and
  • Dividends that fall to be taxed as part of your additional rate Income Tax band are taxed at 38.1%.

For shareholders whose income, including dividends, falls into the higher or additional rate bands, the additional dividend tax payable can be significant.

However, dividends are not subject to National Insurance and if you need to take funds from your company, withdrawing the bulk of your remuneration package as dividends can still be an attractive option. The key, as always, is in the planning. Every person’s tax affairs are to some extent unique and for this reason care needs to be taken when considering the way you take funds from your company.

If you are keen to minimise the amount of tax you pay on your earnings, please call so we can find the best-fit planning option for you.

Does your employer pay for your private petrol?

Tuesday, September 17th, 2019

A reminder that you can avoid the hefty car fuel benefit charge if you drive a company car and your employer pays for your private fuel.

One way to achieve this is to repay your company for the private petrol provided.

Many employers have an arrangement with their company car drivers to obtain reimbursement of any private fuel provided. Usually, the employee must reimburse the employer for private fuel included in petrol bills paid by the employer. Otherwise, the employee may face a tax charge.

Consider the following example:

If your private mileage for the year to March 2020, is estimated to be 600 miles a month, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges, as quoted in the latest rates published by HMRC, is 12p per mile. Accordingly, you should repay £864 to your employer (£72 per month).

In order to exempt yourself from the car fuel benefit charge you must be able to demonstrate that the refund was actually made in the relevant tax year, in this example before 6 April 2020; although in practice, HMRC may give you more time.

Based on the above example, if the vehicle’s list price when new was £30,000, and the car benefit charge rate was 34% (based on a 130g/km CO2 rating) the benefit in kind charge for 2019-20 would be £10,200. With no repayment of private fuel, there would also be a £8,194 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax-payer, the car fuel charge would cost you £3,277 a year in additional tax (£8,194 x 40%). This amounts to £273 per month.

If your actual private mileage proved, on average, to be 600 miles a month, you would therefore save £201 per month (£273 – £72).

It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money.

Unclaimed estates

Monday, September 16th, 2019

There is nothing more intriguing that the notion we may be due untold riches from undisclosed sources. For example, do you have any premium bonds, and did you notify the registrar the last time you moved to a new house?

And did you know that the estates of deceased persons whose beneficiaries or family cannot be traced are held by the government for 30 years?

It is possible to download the unclaimed estates list in a digital format that you can search to see if remote relatives have unclaimed estates that you might be eligible to claim.

Not a task for the faint hearted.

The department that manages the list is known as the Bona Vacantia division. In a recent update posted on the Gov.uk website they said:

The Division publishes a list of unclaimed estates which have been recently referred, but not yet administered, and historic cases which have been administered but not yet been claimed within the time limits for doing so.

The list is published in a Comma Separated Values (CSV) file format. This acts like a spreadsheet and although it can be opened in any text editor it is best viewed in a spreadsheet application, such as Microsoft Excel, Google Docs or OpenOffice Calc.

If you are looking for a particular estate you can search by using Ctrl-F in your browser, text editor or spreadsheet application.

Any estates where the Bona Vacantia division (BVD) no longer has an interest, for example, when a claim to an estate has been admitted, will be removed daily. Estates where the 30 year time limit from the date of death has expired are also removed.

The following notes explain more about the claims process:

If someone dies without leaving a valid or effective will (intestate) the following are entitled to the estate in the order shown below:

  1. husband, wife or civil partner
  2. children, grandchildren, great grandchildren and so on
  3. mother or father
  4. brothers or sisters who share both the same mother and father, or their children (nieces and nephews)
  5. half brothers or sisters or their children (nieces and nephews of the half blood or their children). ‘Half ’ means they share only one parent with the deceased
  6. grandparents
  7. uncles and aunts or their children (first cousins or their descendants)
  8. half uncles and aunts or their children (first cousins of the half blood or their children). ‘Half’ means they only share one grandparent with the deceased, not both

If you are, for example, a first cousin of the deceased, you would only be entitled to share in the estate if there are no relatives above you in the order of entitlement, for example, a niece or nephew.

If your relationship to the deceased is traced through someone who survived the deceased but has since died, you will need to confirm who is entitled to deal with that person’s estate. The person entitled to deal with someone’s estate is known as their ‘legal personal representative’. They are the person entitled to make the claim to the deceased’s estate.

For example, children are only entitled to share in an estate if their parent died before the deceased, in which case they take their parent’s share of the deceased’s estate. If their parent survived the deceased but has subsequently died, then whoever is dealing with their estate should claim.

The unclaimed estates list can be downloaded at https://www.gov.uk/government/statistical-data-sets/unclaimed-estates-list

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