The amount of tax paid by employees on private fuel provided with a company car is now running at a high level based on the cash equivalent of the benefit each tax year. Those with low private mileage may find it’s no longer a benefit. That’s why many employers have put in place different options, such as no longer paying for fuel with company fuel use reclaimed or continuing to pay for fuel but having employees reimburse them for private usage. That way, the employee is not liable for the private fuel tax charge, where this would in all likelihood be higher than the value of the actual fuel used. Should you want advice on policy decisions about employee fuel and the tax implications then we’d be glad to advise you.
1. Make use of technology
Today, businesses have a myriad of resources available to make managing accountancy records convenient and simple. I’d urge businesses to make the most of cloud computing and automation. This is especially valuable now that the Government’s requirement for Making Tax Digital is a reality for the majority of businesses, and flexible working rights have all increased the demand for secure, flexible ‘on-the-move’ cloud-computing solutions.
Setting up a small business can be exciting. So much rides on it – your hopes, your financial security and future opportunities. Yet all the costs to make it happen and then keep it running efficiently can seem daunting. That’s why you should consider whether your small business qualifies for tax breaks that allow you to save money.
HB Accountants is experienced in advising small businesses about their tax breaks. Here are our 7 top tips for you to consider:
A social gathering at work can be an ideal time for team members to get to know each other better but it can be expensive. That’s why it pays to know about Trivial Benefits and tax relief on the annual office party.
- Measures announced
- Looking ahead
- Income tax
- Making Tax Digital (MTD)
- Changes to Entrepreneurs’ Relief
- Other key changes for 2019/20
- Considering capital allowances
- What they said…
The IR35 ‘off payroll’ rules will be extended to the private sector from 6th April 2020 onwards. What exactly does this mean, and what can contractors do to prepare in advance for these legislation changes?
As an employer, if you provide a company car to your employees, they must pay tax on the cash equivalent of the car provided. That’s because HMRC view an employee’s ability to use a company car as a benefit in kind which has a cash value, on top of your employee’s regular salary. The cash equivalent of using a company car is calculated by taking the list price of the car, multiplied by a certain tax percentage. This percentage depends on the amount of carbon dioxide emitted by the car, and the type of fuel it uses. This article will outline the formula for you to follow to work out the list price of the car and find the relevant tax percentage that applies. Should you want more help with company car tax then please get in touch.
To recruit the best talent, you need to provide an attractive pay package. For many employees having the fuel they use in their company car paid for by their employer is an attractive benefit, since they are covered for business miles and private use. But remember that changes in HMRC tax policies mean ‘free fuel’ is now taxed harder as a benefit in kind which can make it less attractive.
Self-assessment is the process by which you advise HM Revenue & Customs (HMRC) of your income, gains and relevant expenses for a tax year. HMRC will calculate your income tax bill based on the information you provide.
When you’re working from home, your bills are bound to rise. You’ll be using electricity, your own broadband and phone line, as well as making more use of your electricity, water and heating (especially in the winter).
If you are self-employed
The Government has published detailed guidelines for business people working from home. The trickiest element of this is that most things will be used for both business and personal use.
HMRC guidance is that you can claim for the cost of business calls made on a private telephone line and also an appropriate proportion of the line rental. You may, therefore, need to provide an explanation for the proportion of the total telephone bill you are claiming. This will also apply to broadband.
You can also claim for other costs of using a room at your home for business purposes (typically for office work). The sort of costs involved could include council tax, rent or mortgage interest, heat, light, water, insurance and cleaning. These can be apportioned on the basis of floor area, usage or time, or a combination of these. Typically, you will use one room as a part-time office (using it full-time is not recommended as this would cause capital gains tax problems on a sale of the property). If this is one of (say) six available usable rooms (excluding common areas, toilets, bathrooms etc), your starting point will be to claim one-sixth of the overall costs. You then need to consider the proportion of business use of that room to private use and reduce the claim accordingly.
If you are an employee
There are allowances you can claim if you’re an employee of a company, but these are dependent on whether or not this is specified as part of your job, or whether you’re doing it voluntarily. If it is your choice to work at home, you will not be eligible to claim any expenses at all.
However, if your employer has specified that you work from home as part of your job, or you have a homeworking agreement, your company can contribute £4 a week, tax-free, to help towards your extra costs.
The allowance only applies for regular working hours – you cannot claim if you occasionally work from home, or do work in the evenings or at weekends.
As an employee, you also have to show that the expense was necessary, and this is a very difficult obligation. If you decide to make this claim it will be restricted to the extra cost of heat, light etc and no claim will be available for council tax, mortgage interest or rent, insurance, or the cost of broadband or telephone lines. That is because those expenses would have been incurred anyway in your private capacity as a homeowner.
If you are a director
If you own your own company, you can set up an agreement between you and that company requiring you to work from home for certain periods of time; you can also set up a licence agreement under which the company will pay you a rent for use of your room as an office. This would enable you to make a claim which is closer to the self-employed rules. You will need to include the rental income on your personal tax return and claim the expenses against that rental. In practice, you will set the rent amount to more or less cover the claimable expenses, because if you set the rent too high you may end up paying personal tax (perhaps at 40%) and only getting corporation tax relief (at 19%)!
If you would like help working out what expenses you are entitled to when working from home, contact us to arrange an appointment.