The newsletter this month includes articles covering: the recent declaration issued by the G8
Conference last month, record keeping for mileage claims, new legislation to reduce tax advantages for members of partnerships and LLPs and the Minimum Wage Rates from 1 October 2013.
International tax and transparency
Readers may be interested to take a look at the conclusions reached by the recent G8 meeting at Lough Erne, Northern Ireland. Their full declaration is set out below: the aim is to improve tax transparency and to bring the international tax system into the modern age.
The G8 Lough Erne Declaration ? issued 18 June 2013
Private enterprise drives growth, reduces poverty, and creates jobs and prosperity for people around the world. Governments have a special responsibility to make proper rules and promote good governance. Fair taxes, increased transparency and open trade are vital drivers of this. We will make a real difference by doing the following:
- Tax authorities across the world should automatically share information to fight the scourge of tax evasion.
- Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where.
- Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.
- Developing countries should have the information and capacity to collect the taxes owed them ? and other countries have a duty to help them.
- Extractive companies should report payments to all governments – and governments should publish income from such companies
- Minerals should be sourced legitimately, not plundered from conflict zones.
- Land transactions should be transparent, respecting the property rights of local communities.
- Governments should roll back protectionism and agree new trade deals that boost jobs and growth worldwide.
- Governments should cut wasteful bureaucracy at borders and make it easier and quicker to move goods between developing countries.
- Governments should publish information on laws, budgets, spending, national statistics, elections and government contracts in a way that is easy to read and re-use, so that citizens can hold them to account.
No doubt parties that have been campaigning for multinationals to change how they calculate taxable profits in the UK will watch progress on the implementation of these lofty words with interest.
Using vehicles for business and private purposes
There are a number of circumstances where care needs to be taken in the way in which claims are made for the business use of a vehicle, usually a car, which has duality of use ? business and personal. We have listed below a few issues that businesses and private car owners should be aware of.
- If you are self-employed and your business assets include a car you should be reducing your claim for capital allowances, loan and HP interest and running costs based on your private use of the vehicle. The percentage added back should be based on a record of your private and total mileage.
- Alternatively, if your business turnover does not exceed the VAT registration threshold (currently £79,000) you can use the fixed mileage rates referred to below. These do not cover loan interest and this can also be claimed subject to restriction for private use based on private and total mileage for the period claimed.
- If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allow you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter); and, the number of miles you claim. The 45p/25p rate HMRC allow is a maximum as regards being non-taxable. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.
- If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Usually, the cost of any such reimbursement will be lower than the tax charge created by the benefit-in-kind assessment. The reimbursement can be calculated using the ‘advisory fuel rates’ on HMRC’s website and you will need to log your private mileage.
You will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:
- Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.
- The business miles claimed should not be rounded.
- Home to work mileage should be excluded.
Use of LLPs and partnerships is under HMRC microscope.
The Budget 2013 included a stated intention that HMRC would be enabled to take a fresh look at the possible manipulation of profit and loss allocations from partnerships to secure a tax advantage. HMRC has since published a formal consultation on anti-avoidance legislation for LLPs. The effective date for proposed legislative changes is April 2014.
HMRC are particularly concerned that partners in LLPs may be receiving fixed profit share arrangements that are, in all other respects, salaries. This so-called “disguised remuneration” allows the recipients and the partnership to avoid certain Class 1 National Insurance contributions as well as producing some income tax advantages.
Everyone’s estate is currently exempt from Inheritance Tax if valued, including gifts in the last seven years, at £325,000 or less ? the so-called nil rate band. If the entire estate is passed to a surviving spouse or civil partner no Inheritance Tax would be payable due to the spouse or civil partner exemption, so for these couples the nil rate band used to be potentially wasted on the first death. To counter this, legislation was introduced that allowed the unused nil rate band on a first death to be passed, by claim, to the surviving spouse. This applies to second deaths on or after 9 October 2007.
HMRC will also be taking a closer look at partnerships that have corporate members which will be paying Corporation Tax at the lower company rates.
The proposals in the consultation document are widely drawn and we will not know the final rules for some while yet. However, there are some core principles which are likely to make it to the final legislation. We would encourage all our readers who may be affected to make an appointment to discuss any potential implications for their tax position.
National Minimum Wage from 1 October 2013
Employers please note that the National Minimum Wage rates are increasing from 1 October 2013. They will be:
- Apprentice rates: £2.68 per hour. * But see note below.
- Under 18s: £3.72 per hour.
- 18 to 20 years: £5.03 per hour.
- Age 21 years and over: £6.31 per hour.
* This is the rate for apprentices under 19 years old or in their first year. Those 19 years or over and past the first year of apprenticeship should be paid at the rate applicable to their age.
Tax Diary July/August 2013
- 1 July 2013 – Due date for Corporation Tax due for the year ended 30 September 2012.
- 6 July 2013 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.
- 19 July 2013 – Pay Class 1A NICs (by the 22 July 2013 if paid electronically).
- 19 July 2013 – PAYE and NIC deductions due for month ended 5 July 2013. (If you pay your tax electronically the due date is 22 July 2013.)
- 19 July 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2013.
- 19 July 2013 – CIS tax deducted for the month ended 5 July 2013 is payable by today.
- 31 July 2013 ? Second payment on account due for Self Assessment 2012/13.
- 1 August 2013 – Due date for Corporation Tax due for the year ended 31 October 2012.
- 19 August 2013 – PAYE and NIC deductions due for month ended 5 August 2013. (If you pay your tax electronically the due date is 22 August 2013.)
- 19 August 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2013.
- 19 August 2013 – CIS tax deducted for the month ended 5 August 2013 is payable by today.