Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

Smiling businessmen and women

  TAX E-NEWS - October 2015


Welcome to our monthly tax newsletter designed to keep you informed of the latest tax issues.

We hope you enjoy reading the newsletter; remember, we are here to help you so please contact us if you need further information on any of the topics covered.

Peter McDaid CTA ATT TEP
Director



HMRC STRUGGLING?

Yesterday I spent over 45 minutes on the telephone waiting for HMRC to answer. The reason for the call was to ask HMRC to respond to my letter sent to them in early Feb which claimed a £3000 PAYE tax repayment on behalf of a client. I sent a reminder letter in early June and telephoned them in August chasing for this repayment. When I finally managed to wade through the various automatic call options and spoke to a live person I was informed that my letter of February will not be dealt with until mid-December. Apparently if I had written today with a similar claim it will not be dealt with until August next year.

The politicians and their army of in house lawyers working for the UK government and the EU are producing a never ending river of complex and intricate legislation. HMRC are struggling to understand the legislation let alone implement it. This together with them being understaffed and underfunded means that everything is slowly grinding to a halt.

VW EMISSIONS

VW company car drivers be aware that the latest scandal may result in a larger tax bill. The car tax benefit and fuel charge is determined by CO2 emission levels. It has now come to light that the published emissions of VW vehicles are significantly lower than the actual emissions. Will HMRC take the opportunity to profit from this, time will tell.

HMRC RAIDING BANK ACCOUNTS

The Taxpayers Alliance has raised serious concerns regarding HMRC having the power to seize monies from tax payers’ bank accounts. This is known as Direct Recovery of Debts (DRD). It was expected that following discussions with the government that legal protections were to be put in place to restrict HMRC powers in this connection. HMRC stated that the funds would only be removed from a bank account as long as the tax payer is left with £5000 and only after a meeting with the tax payer has taken place to explore all the payment of tax options. HMRC also promised meetings with agents before any action is taken. On reviewing this summer’s Finance Bill for example the meetings with agents do not actually appear in the legislation but are simply included as a non-binding explanatory note to the draft clauses. HMRC also have the ability to issue Hold Orders which would freeze all but £5000 of a tax payers assets if it appears that there is a debt owing to HMRC.

HMRC often get things wrong and as summarised in the first article, can take forever and a day to respond. In the meantime if there are no legally binding safe guards to stop them from carrying out DRD or hold orders this could lead to serious consequences for taxpayers and even put them completely out of business.

UPDATED GUIDANCE ON EMPLOYEE TRAVEL (BOOKLET 490)

HMRC have updated their guidance on employees’ travel and subsistence in booklet 490, available on the Gov.uk website. The publication provides numerous examples on which journeys do and do not qualify as business journeys and are eligible for tax relief.

No tax relief is available for ordinary commuting or private journeys. Ordinary commuting is where the employee travels to their normal workplace, however, where he or she travels to a temporary workplace then the journey qualifies as business travel.

A temporary workplace is a place where it expected that the employee will work for a period not exceeding 24 months and then usually return to the normal workplace after the temporary posting. A temporary workplace can also be a place where the employee works no more than 40% of their time even where this may be for a period exceeding 24 months. So an employee working at another location for no more than 2 days a week (out of 5 days) could treat that location as a temporary workplace.

Booklet 490 also confirms that where the journey counts as a business journey then any reasonable subsistence costs such as hotels and meals would also qualify for tax relief.



COMPANY CAR ADVISORY FUEL RATES

These rates are the suggested reimbursement rates for employees’ private mileage in their company cars and are reviewed each quarter on 1 March, 1 June, 1 September and 1 December. The rates that apply from 1 September 2015 are shown below, with the previous quarter’s rates shown in brackets, if changed:

Engine size petrol diesel  LPG
1,400 cc or less   11p (12p)              7p (8p)
1,600 cc or less  9p (10p) 
1,401cc to 2,000cc   14p   9p 
1,601cc to 2,000cc  11p (12p) 
Over 2,000cc 21p   13p (14p)   14p 

Remember also that if you reimburse your employees the tax free amount of 45p a mile (25p after 10,000 miles) for using their own car for business purposes then 20/120ths of the above amounts can be reclaimed as input VAT by your business. For example, a petrol engine car over 2,000 cc = 21p x 1/6 = 3.5p VAT a mile

BUYING A BUSINESS? NO RELIEF FOR GOODWILL NOW

Ever since April 2002 when a limited company acquires the trade and assets of another business it has been possible to obtain a tax deduction for the goodwill and other intangible assets of the acquired business, generally in line with the accounting treatment. So, if the goodwill of the acquired business was worth say £500,000 and the directors assess the useful economic life as 5 years there would be an allowable tax deduction of £100,000 a year over the 5 year period.

The Summer Budget has blocked this deduction where the goodwill is acquired on or after 8 July 2015, although where the acquisition was prior to that date relief continues to be available. Note that the new restriction applies to goodwill and “customer-related assets” which would include client lists and customer databases.

The restriction does not apply to other intangibles such as patents and manufacturing “know–how” so the allocation of the purchase price of assets in the sale and purchase agreement may have an impact on the availability of tax relief.

SELLING YOUR COMPANY? SHARES OR ASSETS?

The corporation tax deduction for acquired goodwill and other intangible assets that has been available to companies since April 2002 has meant that companies buying other businesses have generally preferred to buy the trade and assets rather than the shares in the target business. However, the vendors would normally prefer to sell their shares in the company rather than a trade and asset deal, as they would usually pay more tax - corporation tax on the sale of assets, followed by a second tax charge getting the cash out of the company. A share sale would of course mean just 10% CGT, where the shareholder qualifies for entrepreneurs’ relief.

The change in the tax treatment of acquired goodwill for the purchaser will mean that there will be less of a conflict between vendor and purchaser as to how the deal is structured. Where the business being sold has accumulated trading losses the purchasing company may be able to take advantage of those losses, if they buy shares, whereas those losses would lapse where just the assets are acquired.

Again, please contact us if you are planning to sell your business as we can help you minimise the tax payable on the sale.


TAX DIARY OF MAIN EVENTS FOR November 2015

Date What's Due
1 November Corporation tax for year to 31/01/15
19 November PAYE & NIC deductions, and CIS return and tax for month to 05/11/15 (due 22 November if you pay electronically)