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Fast Facts

Mileage

The best way to deal with business use of your own car or that of an employee is to claim a mileage allowance for business use. The maximum approved mileage allowance payment has recently increased to 45p per mile for the first 10,000 miles per annum and 25p per mile thereafter. These are the amounts that can be paid as exempt from tax. Please note however that mileage payments for travel from home to your usual office are not an allowable relief against tax. You can pay more or less than the approved rates but if you pay more the excess must be reported to HMRC as a benefit that is taxable and NI liable and if you pay less the employee would be due an extra tax relief. The logical action for most people in business is therefore to pay the approved rates.

VAT on mileage

You can reclaim the input VAT on mileage payments. The only part of mileage payments that can be used for VAT purposes is the fuel element. From June 2011 these are as follows:

Engine Size PETROL
1400cc or less 15p
1401cc to 2000cc 18p
Over 2000cc 26p
Engine Size DIESEL
1600cc or less 12p
1601cc to 2000cc 15p
Over 2000cc 18p

In order to reclaim the VAT component of the fuel element, you must retain VAT receipts to cover the amount of fuel that is deemed to be used in the business journey. When an employee submits an expense claim for business mileage he or she must state the engine size of their car, or the band it falls into, and provide VAT receipts for the fuel purchased. For example if you drive 1000 miles on company business in a 1900cc petrol car then – the value of fuel used would be 1000 x .18p = £180. The VAT element that could be reclaimed is 20/120 x £180 = £30. Fuel receipts to the value of £180 must be retained.

Dispensations

An employer can apply for a dispensation notice from HMRC which can save time in completing end of year forms P9D and P11D. This notice removes the requirement to report agreed expenses and benefits in instances where a director or employee would be able to obtain a tax deduction. Dispensations are often given for travelling and subsistence expenses for business journeys.

PAYE Settlement Agreements (PSAs)

PSAs are very useful when you provide a benefit to an employee on which you do not want them to pay tax and national insurance. You effectively pay both the tax due from the employee and the employer. A PSA is a flexible scheme that can be used to settle any PAYE (Pay As You Earn) tax and National Insurance contributions (NICs) due to HMRC on three types of expense and benefit: minor items, irregular items, items where it is impractical to operate PAYE or to value the items for P9D or P11D purposes . An application for a PSA can be made at any time but the timing of the PSA can affect the expenses and benefits that can be covered, a PSA cannot normally be applied retrospectively and a new agreement must be made each year. Where a PSA is in place the benefit does not appear on the forms P9D or P11D, and there is no tax or NICs due from the director or employee. Instead, the tax and NICs are payable by the employer. A PSA can include such expenses as incidental travel costs such as taxi fares and annual staff parties as well staff gifts and prizes won by staff.

Requirement for annual audit

If your company exceeds £6.5 million in turnover, exceeds an asset value of £3.26 million or is engaged in certain trades (e.g. solicitors and charities) you will be required to have a statutory audit. Most small companies however are exempt from audits.

Small claims

In England and Wales, you can use the small claims court for claims up to £5,000 this would include unpaid debts. Did you also know that if your claim is for €2,000 euros or less you can use the European small claims procedure to claim against a person who lives in another member state, then you can issue proceedings in your local court, and any resulting judgment will be enforceable directly in the defendant's member state.

Capital Gains Tax when your spouse dies

When you spouse dies and you inherit assets from them including any investment properties which you already jointly own there is no capital gains tax to pay on the portion of the property you inherit from your spouse. So for example if you bought an investment property together for £200,000 and at the time of your spouse’s death it is worth £300,000 if you subsequently sell the property for £325,000 you would only be liable for capital gains tax on the profit of your half of the property i.e. £50,000 up to the point of your spouse’s death and then a further £25,000 on the profit for the whole property after their death. Of course you will still have to pay inheritance tax on inherited assets if these exceed the inheritance tax free limits.

Swiss Bank Account Tax Deal

As long as you declare all the income and gains from your overseas investments and bank accounts on your UK tax return, there is no problem in having money in a Swiss bank account. However some individuals took advantage of the Swiss laws permitting the banks to keep their customers' details private, even from tax authorities, and did not declare the income on their tax returns.

To remedy this non-disclosure the UK Government has agreed a tax deal with Switzerland. From 2013, investment income from Swiss bank accounts held by UK residents will be subject to a withholding tax of 48%, and gains made on those investments will be subject to withholding tax of 27%. These withholding taxes will NOT apply if the bank account holder authorises the bank to disclose all details of the income to HMRC, and pays any associated taxes in the UK.

To settle past tax liabilities, all existing funds held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 19% and 34%. This deduction will only apply to amounts in bank accounts open at 31 December 2010, which remain open at 31 May 2013. However, if the bank account holder has instructed the bank to disclose details of the account to HMRC, the one-off deduction will not apply, but HMRC will follow-up all disclosures made.