This month’s newsletter includes articles covering: VAT reclaims for a vehicle purchase, a government pledge to cover EU grants and funding, a reminder for parents with high incomes that they may subject to the High Income Child Benefit Charge, and a brief description of recent HMRC court successes.
Claiming back VAT on a vehicle purchase
Generally speaking, the purchase of any vehicle where there is any element of private use means any reclaim of VAT may be restricted. HMRC’s website offers the following guidance:
Due to the private use restriction, it is usual that no VAT can be recovered on the purchase of a car. However, you may be able to claim all the VAT on a new car if it’s mainly used:
If you are buying a commercial vehicle, you can usually reclaim the VAT. For example, a van, lorry or tractor. You can only reclaim the VAT if you use the vehicle in a business.
If they’re used only for business, you can also reclaim VAT on:
If you are in any doubt that a proposed vehicle purchase is eligible for a VAT reclaim please contact us for advice. Reclaiming the VAT when a claim is in doubt will only attract the attention of HMRC.
Government to replace EU funding
Thousands of British organisations will receive guarantees over EU funding in a new move by Chancellor Philip Hammond last month.
Key projects supporting economic development across the UK will be given the green light, ending uncertainty over their future following the UK’s decision to leave the European Union.
Assurances set out by the Treasury include:
As a result, British businesses and universities will have certainty over future funding and should continue to bid for competitive EU funds while the UK remains a member of the EU.
And in a new boost to the UK’s agricultural sector Mr Hammond also guaranteed that the current level of agricultural funding under CAP Pillar 1 will be upheld until 2020, as part of the transition to new domestic arrangements.
The Treasury will work closely with the devolved administrations on subsequent funding arrangements to allow them to prioritise projects within their devolved responsibilities.
Chancellor of the Exchequer, Philip Hammond said:
The UK will continue to have all of the rights, obligations and benefits that membership brings, including receiving European funding, up until the point we leave the EU.
We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive.
That is why I am confirming that structural and investment funds projects signed before the Autumn Statement and Horizon research funding granted before we leave the EU will be guaranteed by the Treasury after we leave. The government will also match the current level of agricultural funding until 2020, providing certainty to our agricultural community, which play a vital role in our country.
We are determined to ensure that people have stability and certainty in the period leading up to our departure from the EU and that we use the opportunities that departure presents to determine our own priorities.”
High Income Child Benefit Charge
A reminder, that if either parent’s income exceeds £50,000 this will affect eligibility for Child Benefits.
A tax charge, known as the ‘High Income Child Benefit Charge’ (HICBC), is payable if a parent has an individual income over £50,000 and:
It doesn’t matter if the child living with you is not your own child.
If the HICBC does apply, the parent with the highest income (if both exceed £50,000) will need to declare the amount of the Child Benefit received on a Self Assessment tax return. The tax charge will then claw back the Child Benefit received at the rate of £1 for every £2 that income exceeds £50,000. This means that if income is more than £60,000 the HICBC will equal Child Benefit received.
If parents can see that one or both incomes will exceed £60,000 they can elect to withdraw their Child Benefit claim in which case, no entry on a tax return would be required.
If income is in, or just over the £50,000 to £60,000 band, paying pension contributions or donations under gift aid can reduce the impact of the HICBC as well as reducing tax.
New successes for HMRC in the courts
HMRC seem to be making progress in their attempts to discourage, and recover unpaid tax, from participators in tax avoidance schemes.
In a recent high profile case, HMRC have recovered more than £434m in unpaid taxes from users of the tax avoidance scheme promoted by the Ingenious Film Partnership. Their scheme tried to use artificial losses arising from investments in a range of movies, including the blockbusters Avatar, Life of Pi and Die Hard 4.
Director General of Enforcement & Compliance Jennie Granger said:
“These were some of the biggest films of all time, and the schemes involved people claiming far more in tax than they invested in the first place. We always say that if something is too good to be true then it probably is. And in this case the long legal battle will mean that investors face even bigger bills for interest and legal costs.”
In a second win for HMRC, they were successful in stopping a scheme by Icebreaker who attempted to create artificial losses from investments in limited liability partnerships.
For both schemes users claimed more in tax relief than they had invested.
The Icebreaker decision is HMRC’s second win against the scheme, following a victory in the First Tier Tribunal in 2014. The total tax at stake was £134 million.
This means that HMRC has now secured more than £1.2 billion in disputed tax from wins in avoidance litigation since the beginning of April.
Tax Diary September/October 2016
1 September 2016 – Due date for Corporation Tax due for the year ended 30 November 2015.
19 September 2016 – PAYE and NIC deductions due for month ended 5 September 2016. (If you pay your tax electronically the due date is 22 September 2016)
19 September 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2016.
19 September 2016 – CIS tax deducted for the month ended 5 September 2016 is payable by today.
1 October 2016 – Due date for Corporation Tax due for the year ended 31 December 2015.
19 October 2016 – PAYE and NIC deductions due for month ended 5 October 2016. (If you pay your tax electronically the due date is 22 October 2016.)
19 October 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2016.
19 October 2016 – CIS tax deducted for the month ended 5 October 2016 is payable by today.
31 October 2016 – Latest date you can file a paper version of your 2016 Self Assessment tax return.
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