Tax and Your Company Car

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There are many factors which will influence your choice of company car. These can include the distance you travel, terrain covered, the price, your lifestyle and perhaps even your clients. However, is tax ever a consideration?

The start of the tax year saw an increase in the company car rates and indeed the rates are increasing quite significantly year on year. Assuming however that you have some degree of choice over the car make and model, you can influence the tax that you pay.

The two factors which determine the tax charge attached to a company car are the list price of the vehicle and its CO2 emissions.

The table below shows the benefit in kind charge for cars with various, hypothetical,  list prices and CO2 emissions.  The rates applicable to the current tax year (2017/18) have been used.

List price CO2 emissions Fuel type Benefit in kind value
£17,000 102g/km Petrol £3,230
£25,000 99g/km Petrol £4,500
£25,000 117g/km Diesel £6,250
£35,000 0g/km Electric £3,150
£50,000 41g/km Electric/Petrol £4,500
£50,000 155g/km Diesel £16,500

In addition to the company car benefit there is also a fuel benefit if the employer provides fuel for private use; the value of the fuel benefit is affected by the CO2 emissions but not by the list price.

Although tax will not be the only issue affecting your choice of company car, perhaps it ‘auto’ be a consideration?

If you’d like any more information please contact Green & Co Accountants.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Tax Free Childcare

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The Government’s new Tax-Free Childcare scheme will be phased in across the UK from 28 April 2017, and will replace the current Childcare Voucher Scheme.

For the first time, the scheme will not only cover full time employees but also those who are part time, on maternity, paternity or adoption leave and people who are self-employed, subject to meeting HMRC’s eligibility criteria.  Initially, the scheme will only be available to parents of children under 2 years old, but by the end of the year this will be extended to all working parents across the UK with children under 12, or under 17 if disabled.

How the scheme works

The Government offers working families 20% support towards qualifying childcare costs.  Through the childcare service, parents must apply to open an online childcare account provided by NS&I, which payments can be paid into by the families and out of directly to the childcare provider.  For every £8 that is paid in to the account, the Government will make a top up payment of an additional £2, up to a maximum of £2,000 per child per year (£4,000 for disabled children).

Once this scheme has been implemented, any Employer Supported Childcare (ESC) schemes will be closed.  However, if you are already in an ESC prior to the launch you will have a choice of which scheme you would like to stay with, and the same scheme must be used for each child.

You can find a Childcare Calculator on the HMRC website which will help you compare the schemes available to you and check which works best for your family.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Some employee perks are losing their tax breaks.

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From 6 April 2017 the tax and employer national insurance advantages of a salary sacrifice or salary exchange will be removed, with the exception of:

  • Pensions
  • Childcare (Vouchers, workplace nurseries or directly contracted childcare)
  • Cycle to work
  • Ultra-low emission cars with co2 emissions of or less than 75g/km.

Any employees who have swapped their salary for benefits, for example, additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income.

If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees, they will be protected until April 2021. All other arrangements (arranged before April 2017) that are not detailed above will be protected until April 2018.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Accountancy firm develop its own software in bid to perfect service to clients

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This weeks edition of the South Wales Argus features an article on the development of our own software.

An accountancy firm has developed its own software suite in order to help businesses manage their taxation and finances better.

Cwmbran-based accountancy firm Green & Co Accountants and Tax Advisors has spent over two years researching what their clients need ahead of what is a busy few years of legislative changes.

The software suite is comprised of three facets; an income tax forecaster, a financial performance review and a prosperity dashboard.

Barrie Kenyon, Partner at the firm, said: “Recently, the government has made a number of adjustments to the tax system that are all coming into effect across the next three to four years such as the changes to mortgage interest relief and company car benefit. We want our clients to see how the changes in legislation will affect them so we can reorganise remuneration in a tax-efficient way.”

With Green & Co’s software suite, clients can use the forecaster to analyse the current taxable income and see what future liabilities will be for the next five years.

Explaining the financial review element of the software, Mr Kenyon said: “Some clients may not be able to fully understand the numbers thrown at them from the accounts. It is important that they know how to digest the data from key performance indicators of how the business is performing. Our graphical analysis helps clients understand how the business has been performing year-on-year and it is something we can help them work through and improve upon.

“Our prosperity dashboard reviews the business’ progression toward set goals whilst affording directors accurate up-to-date information as opposed to waiting until year-end accounts are produced.”

The theory behind the software is to provide businesses with real-time information in order to make quicker and better-informed decisions regarding the performance, direction and sustainability of the business.

Mr Kenyon continued: “As with everything we strive to achieve, our end goal is to help build a stronger business for our clients whilst increasing profit and reducing liabilities.”

Green & Co Accountants and Tax Advisors specialise in business growth and tax minimisation for businesses across Wales and the South West of England.

For proactive advice, contact Green & Co Accountants and Tax Advisors on 01633 871 122, follow @Green_and_Co on Twitter or email barrie@greenandco.com.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

‘Tis The Season Of Giving – Some Christmas Cheer From The VAT Man

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Here we are again – can ‘yule’ believe it’s that time of year when businesses like to ‘present’ their staff with a reward for all their hard work? Did you know that certain gifts can be tax efficient? The VAT man won’t entirely ‘reindeer’ on your parade.

First off, we have employee gifts. It doesn’t have to be ‘deer’, in fact as long as the value of gifts given to each employee doesn’t exceed £50 (exclusive of VAT) within a 12 month period, then you don’t have to declare output tax. If however, you’re feeling overly generous, and exceed the £50 limit, then you have to declare output VAT on the total amount of those gifts. He’s not a total Grinch though, you will be entitled to reclaim input VAT on the purchase cost. The £50 limit does not include administrative expenses, e.g. postage and packaging, and the offering must meet the gift criteria in order to qualify.

Then we have the Christmas parties. If you decide to ‘wrap’ up 2016 with a Christmas party for employees, you can reclaim VAT on all the costs. If guests are invited along too (since Christmas is a family affair) then you must apportion the VAT reclaimed to reflect this.

And that’s a Christmas Wrap, we hope you have a Happy Holly Day, from all at Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Update on Tax Free Childcare

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Further detail has been released on the new tax free childcare scheme that HMRC are set to debut in early 2017.

Under the scheme eligible parents open an online account, which they can use to pay a registered childcare provider. HMRC top up the account with £2 for every £8 paid in, up to a limit of £2,000 per child per year, or £4,000 for disabled children.

Parents will have to be in work to qualify with each earning around £115 a week. However, they will be ineligible if they earn in excess of £100,000 a year.

Parents who are enrolled in an employer operated childcare voucher scheme can continue in that scheme or switch to the new scheme. They are advised to consider which scheme is more beneficial to them before making a decision. Childcare voucher schemes will be open to new entrants until April 2018.

If you’d like to discuss this further please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

It’s HMRC On The (Mobile) Telephone

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Once again we find ourselves in P11D season, that joyous time in the tax calendar where expenses and benefits provided by employers to their employees are dissected for inclusion on the P11D.

Employers will no doubt have the same conversations they have with their accountants each year concerning the chargeability of benefits and expenses and one such conversation will centre around mobile phones.

If an employer provides an employee (or director) with a mobile phone it will only be exempt from tax and national insurance if the employee is provided with only one mobile phone or sim card and the contract is between the employer and the supplier. This can prove an issue for small companies that have transferred from sole trades where the proprietor has kept the contract in their name on becoming a director.

If the employer reimburses anything more than itemised business calls and the contract is between the employee (or director) and the supplier then a benefit in kind will be assessed on both employee and employer and tax and NIC will be due.

The expenses and benefits system is currently undergoing a re-haul and if you’re unsure of any existing or new procedures it is advised that you speak to your tax adviser.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Is It Time To Ditch Your Fuel Charge Benefit?

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The car benefit charge multiplier increased from £21,700 to £22,100 on 6 April 2015 and, with effect from 6 April 2016, will increase again in line with the retail prices index. The equivalent benefit for vans is £594 and, again, will increase in line with the retail prices index.

This means, for example, if your company car has CO2 emissions between 120-124 you will incur a fuel benefit charge of £3,990 for a petrol car (£22,100 x 19%) or £4,862 for a diesel car (£22,100 X 22%)

For a higher rate taxpayer the cost in terms of extra tax is either £1,596 or £1,945 respectively. As the multiplier is to increase, so will the benefit. The higher the Co2 emissions for the car, the higher the benefit, so for a car with emissions between 140-144 the benefit increases to £5,083 and £5,746, or extra higher rate tax of £2,033 and £2,298.

If the amount you would spend on private fuel is below the tax you pay on the benefit then it is time to have a rethink on how you claim the fuel you use for business purposes and so avoid any benefit.

Green & Co can offer advice to ensure that the most tax advantageous method is implemented. Please contact us for further information.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Michelle Meiklejohn at FreeDigitalPhotos.net