Archives for July 2013

The Budget 2013 included a stated intention that HMRC would be enabled to take a fresh look at the possible manipulation of profit and loss allocations from partnerships to secure a tax advantage. HMRC has since published a formal consultation on anti-avoidance legislation for LLPs. The effective date for proposed legislative changes is April 2014.

HMRC are particularly concerned that partners in LLPs may be receiving fixed profit share arrangements that are, in all other respects, salaries. This so-called “disguised remuneration” allows the recipients and the partnership to avoid certain Class 1 National Insurance contributions as well as producing some income tax advantages.

HMRC will also be taking a closer look at partnerships that have corporate members which will be paying Corporation Tax at the lower company rates.

The proposals in the consultation document are widely drawn and we will not know the final rules for some while yet. However, there are some core principles which are likely to make it to the final legislation. We would encourage all our readers who may be affected to make an appointment to discuss any potential implications for their tax position.

Employers please note that the National Minimum Wage rates are increasing from 1 October 2013. They will be:

• Apprentice rates: £2.68 per hour. * But see note below.
• Under 18s: £3.72 per hour.
• 18 to 20 years: £5.03 per hour.
• Age 21 years and over: £6.31 per hour.

*This is the rate for apprentices under 19 years old or in their first year. Those 19 years or over and past the first year of apprenticeship should be paid at the rate applicable to their age.

There are a number of circumstances where care needs to be taken in the way in which claims are made for the business use of a vehicle, usually a car, which has duality of use – business and personal. We have listed below a few issues that businesses and private car owners should be aware of.

1. If you are self-employed and your business assets include a car you should be reducing your claim for capital allowances, loan and HP interest and running costs based on your private use of the vehicle. The percentage added back should be based on a record of your private and total mileage.
2. Alternatively, if your business turnover does not exceed the VAT registration threshold (currently £79,000) you can use the fixed mileage rates referred to below. These do not cover loan interest and this can also be claimed subject to restriction for private use based on private and total mileage for the period claimed.
3. If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allow you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter) and the number of miles you claim. The 45p/25p rate HMRC allow is a maximum as regards being non-taxable. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.
4. If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Usually, the cost of any such reimbursement will be lower than the tax charge created by the benefit-in-kind assessment. The reimbursement can be calculated using the ‘advisory fuel rates’ on HMRC’s website and you will need to log your private mileage.

You will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:

• Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.
• The business miles claimed should not be rounded.
• Home to work mileage should be excluded.