Archive for May, 2013

New contractual conditions for government contracts

Thursday, May 30th, 2013

From 1 April 2013 bidders for government contracts will need to certify that they are tax compliant and if they fail this test they will be excluded from winning government contracts.

The new restrictions will apply to Central government tenders advertised on or after 1 April 2013. The bidding process will include a new pass/fail question in the pre-qualification questionnaire (PQQs). This will require bidders to self-certify that they had no occasions of non-compliance in the past. PQQs should be submitted within 30 days of the initial advert in the Official Journal of the European Union. Tax non-compliance will arise where the bidder has accepted, or a court has determined, that additional tax is due and as a consequence a tax return has been amended. Tax non-compliance will further depend on circumstances where one or more of the following criteria applies:

  • The new general anti-abuse rule applies.
  • The Halifax abuse principle applies – this is an abusive practice when two conditions are met. The first that the transactions concerned must give a tax advantage contrary to the purpose of the legislation, and secondly, that the “essential aim” of the transactions was to obtain a tax advantage.
  • The scheme was notifiable under the disclosure of tax avoidance scheme rules and has failed, or
  • There is a current criminal conviction for a tax related offence or a penalty for civil fraud or evasion.

Bidders will have an opportunity to add an explanatory statement setting out mitigating factors when they submit their PQQs. The new guidance applies to contracts advertised by: central government departments, executive agencies and non-departmental public bodies.

New Publication – Successful Retirement Planning

Wednesday, May 29th, 2013

Our latest publication in our ‘Active Practice’ series is entitled ‘Successful Retirement Planning’ is now available from our website, this guide looks at some important considerations when planning for income in retirement.

Many people spend time thinking about what retirement might look like financially, and this is particularly important now given the stock market recovery we have seen in 2013, albeit against the background of a sluggish economy and continuing low interest rates.

Pension funds have been depleted by higher tax charges, the loss of compounding values between 2008 and 2013 and increased longevity.

It is important to look at how much you need to save to secure your desired income and how your saving can be optimised for tax purposes. The applicable laws and tax regime change over time, as do economic circumstances and market-based solutions.  Our publication addresses these issues and more and can be accessed on the following link http://mccleary.wpengine.com/mcclearyandcompanyltdPWP_june13_FU_compcar.pdf

Company Car Taxation

Tuesday, May 28th, 2013

This guide focuses on company car tax rules and how tax legislation is being used to encourage businesses to acquire more environmentally-friendly vehicles.

 

The provision of a company car is normally a taxable benefit for an employee or a director. The company car benefit charge for a full year is calculated by multiplying the price of the car for tax purposes (in most cases, its list price plus accessories less capital contributions) by the ‘appropriate percentage’.

The ‘appropriate percentage’ used to calculate the benefit is based on the level of CO2 emissions. The benefit charge is then subject to tax at the effective tax rate of each individual. Employers pay Class 1A national insurance contributions (NICs) on the benefit at 13.8 per cent.

The annual taxable value of the benefit remains up to a maximum of 35 per cent of the list price of the car when first registered.

The list price includes the full cost of the car, car tax (if applicable), VAT and delivery charges. There is no cap on the list price of the car for calculating the benefit. The list price of most accessories must be included whether fitted when new or subsequently.

Cars running solely on diesel fuel are currently subject to a 3 per cent supplement, subject to the 35 per cent cap. Employees and directors who are provided with a company car that is propelled solely by electricity will not have to pay tax on the benefit. Additionally, cars first registered before January 1998, for which there are no reliable CO2 emissions data, are taxed according to their engine size.

 

Fuel benefit charge

Where the employer also pays for any fuel used privately by the employee, there is an additional benefit charge applied to a standard value of £21,100. This charge is based on the same CO2 car benefit percentages referred to previously.

There is no fuel benefit charge for vehicles propelled solely by electricity.

 

Employee contributions

Where the employee is required as a condition of the car being made available to pay for the private use of a car, the value of the benefit is reduced accordingly on a pound for pound basis.

By contrast it is ‘all or nothing’ for the fuel benefit charge, which means the full tax charge on the value of the benefit is due unless the employee reimburses all private fuel costs.

HM Revenue & Customs publishes advisory fuel-only rates which will be accepted either for employers reimbursing employees for the cost of fuel for business mileage, or for employees reimbursing employers for the cost of fuel for private mileage in a company car. Alternative rates may be negotiated, for example when it is necessary for the performance of his or her duties that an employee uses a vehicle with a typically higher fuel consumption rate. The advisory fuel-only rates are:

Advisory fuel-only mileage rates   from 1 March 2013

Engine Capacity Petrol
Up to 1400cc 15p
1401cc – 2000cc 18p
Over 2000cc 26p
Engine Capacity Diesel
1600cc or less 13p
1601cc-2000cc 15p
Over 2000cc 18p

Tax payable

Income tax at the basic, higher or additional rate is chargeable depending on the employee’s rate of pay. The tax is usually collected under the PAYE system by appropriate adjustment of the employee’s tax code.

For the benefit to be attractive, the employee must pay less in extra tax than it would cost them to run their own car out of their taxed income. These are examples of the 2013/14 tax costs to an employee of a company car during a whole tax year:

Basic rate liability example

 

List Price CO2   emission g/km Tax Rate 20 per   cent
Petrol Diesel
Car
£
Fuel
£
Car
£
Fuel
£
£13,000 164 624 1013 702 1139
£18,000 196 1116 1308 1224 1435
£25,000 240 1750 1477 1750 1477

Higher rate liability example

List Price CO2   emission g/km Higher Tax Rate   40per cent
Petrol Diesel
Car
£
Fuel
£
Car
£
Fuel
£
£13,000 164 1248 2026 1404 2279
£18,000 196 2232 2616 2448 2870
£30,000 240 4200 2954 4200 2954

Additional rate liability example

List Price CO2   emission g/km Tax Rate 45per   cent
Petrol Diesel
Car
£
Fuel
£
Car
£
Fuel
£
£13,000 164 1404 2279 1580 2564
£18,000 196 2511 2943 2754 3228
£40,000 240 6300 3323 6300 3323

Company vans

The taxable benefit for the unrestricted use of company vans is £3,000 plus a further £564 of taxable benefit if fuel is provided by the employer for private travel.  Home to work travel in a company van is not deemed to be private use.

The tax payable on the use of a company van ranges from £600 up to £1,603.80 p.a., and the employer’s Class 1A NIC payable ranges from £414 to £491.83 p.a.

 

Business use of an employee’s own car

It is normal practice for employees to be reimbursed per mile for business use of their own cars.

A statutory system of tax and NIC free mileage rates applies for business journeys in employees’ own vehicles:

 

Cars and vans
On the first 10,000   miles in the tax year 45p per mile
On each additional   mile above this 25p per mile
Motor cycles 24p per mile
Bicycles 20p per mile

Excess mileage payments are reportable on forms P11D and taxed accordingly. Note that the lower rate for more than 10,000 business miles only applies to income tax. The NIC rate remains at 45p for any number of miles incurred.

If an employee travelling on business carries fellow employees as passengers, they may be reimbursed a further 5p per passenger tax free provided it is a business journey in respect of the passengers. No claim can be made if the employer does not pay passenger payments.

 

Tax-free benefits

Car parking

The provision of a car parking space at or near the employee’s place of work is not an assessable benefit.

Pool cars

There is no tax for using a pool car. This is one where private use is merely incidental to the business use, and it is not normally used by one employee to the exclusion of all others. Please note that a pool car must not normally be kept overnight at or near an employee’s home.

‘Lower paid’ employees

The provision of a car for an employee other than a director who is paid at a rate below £8,500 per year (including the value of benefits) does not attract any charge to income tax. Nor is there any charge on fuel for private use provided to such employees.

 

Compliance pointers

Accurate and up-to-date records of all business mileage undertaken in private vehicles must be maintained at all times. In the case of company cars, all fuel receipts should be retained as proof of actual costs incurred. Employers should ensure full pool car mileage records are kept to avoid unexpected tax bills in the event of a PAYE inspection.

In order to prevent too little tax being deducted at source on the provision of annual benefits, it is important to verify your personal tax code periodically to ensure that the correct benefit is being applied.

We can help you understand more about company car taxation. Contact us to find out more.

HMRC name and shame list grows

Friday, May 24th, 2013

In accordance with legislation HMRC may publish information about a deliberate tax defaulter where:

  • HMRC have carried out an investigation and the person has been charged one or more penalties for deliberate defaults, and
  • those penalties involve tax of more than £25,000.

However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults. HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based. This sufficient information includes the name of the taxpayer and their postal address.

The first list was posted on HMRC’s website on 21 February 2013. A further list was added on 14 May 2013.

It is important to understand that these lists are tax cheats, HMRC are not legally entitled to name anyone who has not broken the law, so those involved in legal tax planning, no matter how agressive, have nothing to worry about.

Boris calls for London tax raising powers

Wednesday, May 22nd, 2013

In a radical rethink of the way in which London is funded the 17 members of the London Commission are due to report this week and are likely to recommend that certain tax raising powers are devolved. It is estimated that Revenue streams of up to £12bn could be placed under local control with a pound-for-pound reduction in Treasury grants.

Taxes mooted as possible candidates for the transfer include:

  • Stamp Duty Land Tax, and
  • Capital Gains Tax on property disposals

These would be in addition to Business Rates and Council Tax. In addition to these taxes the London Commission report seems likely to recommend a London tourist tax. This would be used to invest in London’s tourist industry. 

How these taxes would be collected is another matter. At present Capital Gains Tax in particular is assessed by HMRC from information filed via self assessment returns. Are we to expect a national and a London rate for CGT? Will London be issuing tax returns? It would seem there are a lot of practical issues to be sorted in addition to the Treasury’s attitude to devolving tax revenue streams to London.

It is also mooted that the present Treasury controls over local borrowings by the GLA (Greater London Authority) be removed in order that London can raise money to fund the promotion of growth or to reduce public expenditure.

No doubt Bristol, Birmingham, Liverpool and Manchester, and a number of the other, larger cities will be watching developments with interest. We may be moving toward a nation of city states?

Getting the best deal from banks

Friday, May 17th, 2013

Banks are tarred with being the cause of the recession that has plagued the global and UK economy for the past four years. Whatever truth there is in this point of view one thing is certain: almost without exception they are now risk-averse.

Unless you can prove that your need for financial support is well founded you will either fail to negotiate the loan you need, or, you will have to pay a premium rate.

In this posting we have highlighted just a few of the issues you should consider before making an application for funding:

  • Do you have a good track record with your existing lender? If yes then an application can be supported by previous bank statements proving that you can keep to your agreements.
  • Can you partner up with an accountant to prepare and present your application? This may give the bank some comfort.
  • Are you clear why you need the funding?  Vague assertions that you need more working capital will not inspire confidence.
  • Are you going to pass a credit reference check?
  • Does the present management team have a good track record and are they positively motivated to achieve the required results?
  • Do you have a healthy Balance Sheet? Are you highly geared? Why is this?
  • Are you reliant on one or two major customers?
  • Are you asking for support to develop an existing, well established business, or is the application for a new venture? If the latter bank will need additional evidence that you have thought through the implications.
  • You will need to prepare a business plan and the more detailed information you can provide the better.
  • You will also need to consider the extent to which you are prepared to offer guarantees and security. Leaving the bank to carry all the risk is unlikely to be a successful strategy.

The days of knocking together a quick spreadsheet and taking the bank manager to lunch are long gone. Your manager will need to run your application through a rigorous lending process before a decision can be made. Planning is a key ingredient. Put yourself in the bank’s position and consider their reaction to your application: what information would you need if you were approached for financial support?

HMRC scours data for off-shore tax dodgers and advisors

Thursday, May 16th, 2013

HMRC is currently investigating a large number of tax advisors and their clients who are suspected of concealing untaxed income and assets in off-shore tax havens.

Due to their recent success in reaching tax accords with off-shore jurisdictions HMRC are now working their way through 400 gigabytes of data. The data has revealed the use of complex structures to conceal assets in Singapore, the British Virgin Islands, the Cayman and Cook Islands.

Apparently HMRC is working with the US and Australian tax authorities to make sense of the data and so far there have been no comments offered as to the source of the data being investigated.

Jennie Granger, a HMRC commissioner, is quoted as saying:

“These arrangements may be perfectly legitimate and may already have been declared to HMRC. However they may involve tax evasion, avoidance or other serious offences by taxpayers. What has to stop is using offshore structures to illegally hide assets and income."

Interestingly, HMRC have made it clear that they will not only be contacting over 100 individuals already discovered during their research, but also more than 200 professional advisors who were involved in the set-up, promotion and implementation of the schemes.

Government Assistance For Business Seminar 4 June – Speakers and Agenda Finalised

Monday, May 13th, 2013

We are pleased to announce that we have now finalised the line up and timings for our seminar ‘Government Help & Funding – The Whole Picture’. The event takes place at Lough Neagh Discovery, Oxford Island, Lurgan.  If you haven’t registered already, you can do so by simply emailing vanessa@mcclearyaccountants.com or registering on line at http://mccleary.wpengine.com/index.php/mccleary-company-ltd-2013-seminar-programme/ .

AGENDA

9:00am Registration Tea/Coffee Bacon Rolls

9:25am Welcome & Introduction Warren McCleary, McCleary & Company Ltd.

9:30am Survival & Growth Initiatives for Micro and SME’s Paul Kavanagh, Economic Development Officer Craigavon Council

10:00am An Overview of Department for Employment & Learning’s Programmes and Services Clare Mooney & John Mallon, Employer Contact Managers Department for Employment and Learning.

10:30am  Interaction with Invest N.I. Anne Marie Hamilton, Regional Manager Invest Northern Ireland.

10:50am                      BREAK

11:15am The Route to Effective Joint Bank & Government Support for Businesses Mark Sterritt, Senior Business Development Manager Ulster Bank

11:45am  SUPPORT AVAILABLE FROM CIDO Karen Adamson/Brian Hunter CIDO

12:15pm Research & Development Tax Credits and Alternative Funding Warren McCleary, McCleary & Company Ltd

12:30pm   QUESTIONS

McCleary & Company sign up to Twitter

Thursday, May 9th, 2013

We have now joined the social media revolution, eventually!  We will aim to keep all of our clients, contacts and the local business community up to date with all of the news as it affects local business, please follow us @McClearyandCo .

McCleary & Company Ltd sign up to Twitter

Thursday, May 9th, 2013

We have now joined the social media revolution, eventually!  We will aim to keep all of our clients, contacts and the local business community up to date with all of the news as it affects local business, please follow us @McClearyandCo .

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