Chartered Accountants of Poynton, Cheshire

Tax Tip

When you buy new equipment for your business, ask whether it is energy or water efficient.

Check the list on www.eca.gov.uk to see if you could get a 100% deduction fo the cost in the year of purchase.

On-line filing

Every year, employers are required to send details of the salaries, tax and National Insurance deducted from their employees.

These year-end returns have to be submitted by 19 May 2007 to avoid a fine. These documents can be submitted on-line via the internet.

We can assist you in this process. If you are a small employer (less than 50 employees) and you file on-line, HMRC will pay you £150 tax-free if you file on time for 2006/07.

Company Vans

There has been a big change to the taxable benefit due on vans.

Where an employer provides a van for an employee, which they can use for private journeys, the taxable benefit from 6 April 2007 becomes £3000 per annum.

This taxable benefit is not levied if the private use is merely incidental.

HMRC have given some guidance on what is incidental but this is not exhaustive so we will be pleased to advise on the situation if you are providing vans that can also be used for private journeys.

Useful sites

www.hmrc.gov.uk - H.M. Revenue and Customs

www.dti.gov.uk - Department for Trade and Industry

www.companies-house.gov.uk - company information

Car Benefits

Many employers and directors are often provided with a company-owned vehicle they can use for both private and business purposes. Consideration of the tax treatment is vital.

Company Cars

The threshold for the CO2 emissions-based tax charge on company cars remains at 140g/km. For most cars the taxable benefit is between 15% and 35% of the list price.

Where the employer provides fuel for private use, the same percentage is applied to the standard fuel multiplier of £14,400. Typical tax liabilities for someone driving a £20,000 car in 2007/08 are:

Emissions	Fuel	Taxable %	Car Benefit	Fuel Benefit	Tax & 22%	Tax @ 40%
158	Petrol	18	3,600	2,592	1,362	2,477
188	Petrol	24	4,800	3,456	1,816	3,302
188	Diesel	27	5,400	3,888	2,043	3,715
238	Petrol	34	6,800	4,896	2,573	4,678

Class 1A national insurance contributions will be charged on the employer at 12.8% of the appropriate benefit figure.

Mileage claims

A statutory system of tax and national insurance free rates applies for business journeys in employees' own vehicles. For cars and vans the first 10,000 miles are allowed at 40p per mile, with the remainder at 25p per mile.

The motorcycle rate is 24p per mile, with bicycles at 20p per mile. There are also advisory rates which can be applied as a tax-free maximum for employees claiming for petrol use on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

VAT on fuel for private use in cars

Where businesses buy fuel which has some degree of private use, they must account for output VAT on a scale charge. This is based on the CO2 emissions (rounded down to the next multiple of 5). The VAT chargeable for quarters commencing on or after 1 May 2007 is as follows:

CO2 in g/km	VAT on charge	CO2 in g/km	VAT on charge	CO2 in g/km	VAT on charge
Up to 140	£27.11	175	£39.91	210	£52.57
145	£29.04	180	£41.70	215	£54.36
150	£30.83	185	£43.49	220	£56.30
155	£32.62	190	£45.28	225	£58.09
160	£34.40	195	£47.21	230	£59.87
165	£36.19	200	£49.00	235	£61.66
170	£38.13	205	£50.79	240 or over	£63.45

Company vans

With effect from 6 April 2007, the taxable benefit for the unrestricted private use of vans will be £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.

Van drivers can avoid a benefit charge if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use.

Tax

Mileage claims

The approved mileage rates for employees using their own transport for business travel are:

• First 10,000 miles
• Each mile over 10,000 miles

HM Revenue and Customs has also sanctioned fuel only rates for those reimbursing their employers for private travel or claiming for business travel:

Engine Capacity	Petrol	Diesel	LPG
Up to 1400cc	10p	9p	7p
1401 to 2000cc	12p	9p	8p
Over 2000cc	16p	13p	10p

 

Can the tax be reduced?

There are some steps that can be taken to reduce the taxable benefit.

- The employee or director can make a capital contribution to the cost of the car, up to a maximum of £5,000, which would reduce the MLP.

- The employee or director can make a contribution towards the private running costs of the car, which would be deductible from the taxable benefit. In this case, if the director or employee paid £100 a month, the taxable benefit would fall to £3,000 (£4,200 less £100 for 12 months).

What if the employer provides private fuel?

In this case, a further benefit is levied on the employee or director unless they can prove they paid for all the private fuel themselves.

What if an employee or director uses his or her own car for business purposes?

In this case there is no taxable car benefit in kind. The employee or director can then charge their employer for the business mileage they incur.

Company vans

There are separate rules for the provision of vans that can be used for private purposes. The benefit in kind is a flat rate of £500 a year for vans under four years old. However, this will escalate to £3,000 a year from 6 April 2007.

If you are provided with a company car or van, or if you will make them available to your employees, Appletons Accontants will be pleased to advise you of your options.

 

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