Archives for 2024

The time of supply is the earlier of:
the date when the supply is ‘really’ made, referred to as the basic tax point;
the date when a tax invoice is issued in respect of the supply; and
the date when payment is received for the supply.
There are a number of refinements to be borne in mind in applying this basic rule, particularly the 14-day rule, and there are also special rules for certain kinds of supply.
If a VAT invoice is issued within 14 days of the basic tax point, the basic tax point can be ignored in fixing the time of supply and the date when the invoice is issued is used instead.
The invoice must be a proper VAT invoice and must be issued by the supplier to their customer.
It is possible to opt out of the 14-day rule, but this must be notified in writing to HMRC.

The Institute of Fiscal Studies (IFS) indicates charging VAT on private schools would generate revenue of £1.6bn per year, which Labour claim would fund 6,500 extra teachers.

Many parents have been asking if there is any planning to avoid the 20% increase in private school fees. However, the actual increase may not technically be a full 20% for parents as schools would be able to reclaim some input tax on overheads and property maintenance, potentially off-setting a lower cost base against a slightly higher term fee.

One possible strategy involves pre-paying term fees in advance, often for multiple years rather than pay a term at a time.  This strategy relies on accelerating the “tax point” for the service (see below). There may be anti-forestalling legislation, effective from the day of the announcement, but although Labour have stated that any legislation will not be retrospective, the effectiveness of such strategies cannot be guaranteed.

Both the Conservative and Labour parties have pledged not to increase income tax, national insurance or VAT, although the Labour party have pledged to introduce VAT on private school fees. Both parties are also committed to clamping down on tax avoidance and evasion which they claim will fund their spending plans.  Both of the main parties also claim that removing the remittance basis for non-Doms will also yield more tax revenue, although Labour propose to plug loopholes in the Conservative plans.

One tax measure not matched by Labour is the Conservative proposal to raise the personal allowance for pensioners in line with the State Pension triple lock so that none of the State Pension is subject to income tax. That is clearly aimed at attracting the “grey” vote. Ironically the Age-related personal allowance was abolished by the Conservatives.

A further announcement in the Conservative party manifesto is a permanent extension of SDLT first time buyer relief. If this relief applies, there is no SDLT where the purchase price is no more than £425,000 and 5% thereafter. The relief does not apply where the purchase price is more than £625,000. SDLT first time buyer relief is currently scheduled to end on 1 April 2025.

A measure in the property section of the Conservative manifesto that lacks detail is a proposed 2 year CGT relief where a landlord sells a rental property to the tenant.

The Conservatives claim to be able to save £20bn by making “efficiencies” in the Civil Service – let’s hope that doesn’t mean reducing HMRC staff any further, as customer service is currently appalling.

Labour claim that their proposal to close the “carried interest” tax loophole for general partners in the private equity and venture capital sector will raise £565 million. Such returns are currently subject to CGT at 18% or 28%. This possibly means subjecting carried interest to income tax or aligning CGT rates with income tax rates. However there is no mention of changes to the rates of CGT generally.

In Scotland, the SNP’s manifesto says that they will demand the full devolution of tax powers, including over National Insurance, windfall taxation for companies and to crack down on tax avoidance and evasion. The party will support the reform of VAT to address imbalances in the rating system, including ending the VAT exemption for private schools and introducing a lower VAT rate for hospitality and tourism sectors.

A new service has been launched to help employers and managers with employee health and disability. The guidance contained in the service will help in supporting employees and to understand any legal requirements. There are also links provided to government and other organisations that are able to help.

The guidance contains information on:

Managing absences and staying in touch with employees.

In and out of work conversations with your employees.

Helping you to decide on changes that may help employees stay or come back to work.

How to protect your business and your employees with policies and procedures.

How to manage complex situations.

The service asks you questions, such as “Is your employee currently at work?” or “Has your employee told you they have a health condition or disability?”. Depending on your answers it then provides advice and information about what you need to do.

To try the new service out, see: https://www.support-with-employee-health-and-disability.dwp.gov.uk/support-with-employee-health-and-disability

Picture this: your business is booming, and it’s time to invest in some new equipment or a company vehicle. But with so many financing options out there, how do you decide which one of them is right for you? Let’s break down three popular choices – leasing, contract hire, and hire purchase – so you can make an informed decision without getting lost in financial jargon.

Lease

Leasing means renting an asset (such as machinery, vehicle or computer) from a finance company for a set period. After the lease term ends, you usually return the asset, although sometimes there is an option to be able to buy it. Short-term rentals where the payments cover the asset’s use, rather than its full value, are known as operating leases. At the end of the lease, you return the item and can lease a newer model. Longer-term rentals where the payments cover the full value of the asset over time are known as finance leases. The leasing company legally owns the item, but you use it as if is yours.

Here’s why leases can be good:

Better cashflow: Low upfront costs and spread-out payments help keep your cash in hand.

Stay updated: Easily upgrade to newer equipment or vehicles.

Here are some things to think about with leases:

No ownership: You don’t ever own the asset.

Higher long-term cost: Over many years, leasing can be more expensive than buying.

 

Contract Hire

Contract hire is often used for vehicles. Contract hire is like leasing, but usually includes maintenance and servicing in the monthly payments.

Here’s why contract hire can be good:

Fixed costs: You’ll know exactly what you’ll pay each month, including upkeep.

Cash flow friendly: Like leasing, it spreads out the cost.

Here are some things to think about with contract hire:

Mileage limits on vehicles: Exceeding agreed mileage can cost extra.

No ownership: You can’t keep or modify the vehicle.

 

Hire purchase

With hire purchase, you buy the asset over time. You make a deposit and then regular payments. Once all payments are made, you own the asset.

Here’s why hire purchase can be good:

You own it: At the end, the asset is yours.

Predictable payments: Fixed monthly payments make budgeting easier.

Here are some things to think about with hire purchase:

Bigger upfront cost: Requires a higher initial deposit compared to leasing.

Maintenance responsibility: You’re in charge of upkeep and repairs.

Cash flow impact: Higher monthly payments can strain cash flow initially.

 

Making the decision

To choose the best option for you, you may want to consider the following points:

Cash flow: How much can you afford each month? Leasing and contract hire usually have lower monthly payments.

How long you’ll use it: If you need the asset short-term or it becomes outdated quickly, leasing or contract hire might be best.

Ownership needs: If owning the asset is crucial, hire purchase is the way to go.

Financial impact: Leasing keeps liabilities off your balance sheet, while hire purchase adds both an asset and a liability.

 

Conclusion

Choosing how to finance your new asset doesn’t have to be complicated. By considering your businesses cash flow, how long you’ll need the asset, and whether ownership matters, you can pick the best option for you.

 

Tax can also be a factor in the decision

Date	What’s Due
01/06	Corporation tax payment for year to 31/8/23 (unless quarterly instalments apply)
19/06	PAYE & NIC deductions, and CIS return and tax, for month to 5/06/24 (due 22/06 if you pay electronically)
01/07	Corporation tax payment for year to 30/9/23 (unless quarterly instalments apply)
05/07	Last date for agreeing PAYE settlement agreements for 2023/24 employee benefits
05/07	Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2023/24
06/07	Deadline for forms P11D and P11D(b) for 2023/24 tax year. Also, deadline for notifying HMRC of shares and options awarded to employees.
19/07	PAYE & NIC deductions, and CIS return and tax, for month to 5/07/24 (due 22/07/24 if you pay electronically)
31/7	50% payment on account of 2024/25 tax liability due.

The table below sets out the HMRC advisory furl rates from 1 June 2024. These are the suggested reimbursement rates for employees’ private mileage using their company car.

Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

Engine Size	Petrol	Diesel	LPG
1400cc or less	14p (13p)		11p (11p)
1600cc or less		13p (12p)
1401cc to 2000cc	16p (15p)		13p (13p)
1601 to 2000cc		15p (14p)
Over 2000cc	26p (24p)	20p (19p)	21p (21p)

 

Where there has been a change the previous rate is shown in brackets.

You can also continue to use the previous rates for up to 1 month from the date the new rates apply.

Note that for hybrid cars you must use the petrol or diesel rate. For fully electric vehicles the rate is 8p (9p) per mile.

Employees using their own cars

For employees using their own cars for business purposes the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate continues to be 45 pence per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25 pence a mile thereafter. Note that for National Insurance contribution purposes the employer can continue to reimburse at the 45p rate as the 10,000 threshold does not apply.

Input VAT

Within the 45p/25p payments the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 2500cc petrol-engine car, 4 pence per mile can be reclaimed as input VAT (24p x 1/6).

The HMRC rate of interest on beneficial loans (2.25%) looks very attractive compared to the Bank of England Base rate of 5.25%, and much higher rates charged by banks for unsecured loans.

Note that where loans are made to participators (broadly shareholders) of a close company there is potentially a special tax charge on the company on any loan still outstanding 9 months after the end of the accounting period. The charge is currently 33.75%, the same as the higher rate of tax on dividend income. This tax charge is only repaid to the company after the loan to the participator is repaid or written off.

For example, Fred, the managing director and controlling shareholder of Bloggs Ltd is loaned £100,000 interest free on 6 April 2023. No repayments are made in the year ended 31 March 2024.

The company would need to show a taxable benefit in kind on Fred’s 2023/24 P11d of £2,250 (2.25%)

If Fred repays the loan in full before 31 December 2024 there would be no special charge on the company although Fred would be assessed on the beneficial loan for the 9 months that the loan was in existence in 2024/25.

Note that there are anti- “bed and breakfast” rules to counteract the situation where the loan is readvanced by the company. The anti-avoidance would not apply where the loan is cleared by crediting a bonus or dividend to Fred’s loan account.

If however, only £60,000 was repaid by Fred before 31 December 2024 leaving £40,000 outstanding then there would be a tax charge on the company of £13,500 (assuming 33.75% dividend rate continues) which would be payable in addition to the company’s corporation tax liability for year ended 31 March 2024.

The company would show a taxable benefit in kind on Fred’s 2024/25 P11d based on the official rate of interest on beneficial loans for 2024/25.

If the company then decides to write off or waive the outstanding loan in year ended 31 March 2025 the £13,500 would be refunded. However, Fred would be assessed on the £40,000 as an income distribution (dividend) arising at the date of waiver in 2024/25.

HMRC have announced that the official rate of interest will remain at 2.25% for 2024/25, despite the Bank of England Base Rate currently standing at 5.25%. The official rate of interest is used to calculate the income tax charge on the benefit of employment related loans and the taxable benefit of some employment related living accommodation. These rates used to fluctuate in line with base rate, and changed several times a year, but in recent years HMRC has fixed the rate for the whole tax year making the calculation of the taxable benefit easier to compute.

For those employers including beneficial loans on form P11d for 2023/24 the official rate to be used is 2.25%.  The charge applies where the amount of the loan exceeds £10,000.

Where a company car is provided for use by an employee or director there is a benefit in kind taxable on the employee based on the original list price of the vehicle multiplied by the CO2 emissions percentage for that vehicle. There is an additional benefit in kind where private fuel is paid for by the employer, which also needs to be reported on form P11d unless the employer has arranged with HMRC to deal with the tax on the  benefits via monthly payroll.

Note that unless the employee fully reimburses the employer for private mileage, the additional benefit in kind is based on a notional list price of £27,800 multiplied by the CO2 emissions percentage for that vehicle.  That could be as much as 37%, £10,286 for a car with high CO2 emissions. That would mean £4,114 income tax for a higher rate taxpayer. That would be an awful lot of fuel!

In addition, there would be £1,419 class 1A national insurance contributions payable by the employer.

The table at the end of this newsletter sets out the HMRC advisory fuel rates that apply from 1 June 2024. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years.

Note that this is an all or nothing benefit and, unless there is full reimbursement, there is an additional taxable benefit. The deadline for reimbursing private fuel is 6 July 2024 for the 2023/24 tax year.