Monthly Archives: January 2014

Company Directors and Self-Assessment Tax Returns

Thank you to ACCA for this informative help sheet:

It is mandatory for a company director to file a tax return with HMRC, if a return has been issued.

It is also mandatory for a director (or anybody for that matter) to notify HMRC if they have a liability to tax for a particular year of assessment, by 5 October following the end of the year of assessment, otherwise they become liable to penalties, in accordance with Taxes Management Act 1970 (TMA) s7.

But what about if a Self Assessment tax return has not been issued to a director and he does not have a tax liability?

HMRC’s on-line guidance “Do you need to complete a tax return?” states that:

“You must complete a return if you’re any of the following:

a company director (unless you’re a director of a non-profit organisation, for example a charity, and don’t receive any payments or benefits)………..”

We have been made aware of several instances of HMRC staff insisting that a tax return is required for a director even though a return has not been issued and there is no further tax liability for the year, in accordance with the above guidance.

BUT is this guidance consistent with the legislation?

There is no specific requirement in TMA 1970 for a director to register for self assessment if there is no further tax liability for the year and buried within HMRC’s Manuals at EM4551, there is some further guidance:
“There is no requirement to notify chargeability where there is no liability to Income Tax or Capital Gains Tax or where sufficient tax has been deducted at source to meet the net liability for the year.”
There is no exception to this for directors.

Therefore, if a director of a company has no further tax liability for a tax year AND no self assessment tax return has been issued by HMRC, then there is NO requirement for the director to notify chargeability OR file a tax return with HMRC for the year in question.

If HMRC try to insist that a return is due in these circumstances, you should refer them to TMA 1970, s7 and their own manual at reference EM4551.

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HMRC Penalties

 

  • If you miss the self assessment deadline, a late tax return penalty of £100 will be issued by an automated process at HMRC.
  • If you still have not filed three months after the deadline, you will also start clocking up automatic £10 per day penalties – up to a maximum of £900.
  • If you still have not filed six months after the deadline, in addition to the penalties above, you will have to pay a further penalty of £300 or 5% of the tax liability, whichever is higher.
  • If you still have not filed a year after the deadline, in addition to the penalties above, you will have to pay a further £300 or up to 100% of the tax due as a penalty.

 

The penalty for the late payment of the tax is different and will apply from 28 February. The penalty is 5% of the tax unpaid.

 

There will be another 5% penalty for the outstanding tax six months after the filing deadline. This will be followed by another 5% penalty for payments that are 12 months late.

 

As with the tax return these amounts mount up and each penalty is subject to interest.

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Contract Hire (Vehicles). Is it worth it?

Whether or not you are familiar with the benefits of contract hire and car leasing for businesses will most likely depend on the size of the business. This is the case whether it is owned by you or you are employed by the business. For example, if you own a business and you use your personal car for business purposes there are some large benefits that you are missing out on. Likewise if you are an employee using your own car for work purposes you could use salary sacrifice to cover the cost of your car whilst your employer funds it and you both take advantage of tax benefits.

Despite this, there are many businesses that have no idea of the benefits of leasing their vehicles using contract hire. The most appealing benefits for using contract hire is that a business can avoid as much as 100% of VAT – provided the car is used 100% for business and not personal reasons. If it is used for personal reasons then you will be able to avoid 50% of VAT.

In summary, contract hire is an ‘operational lease’ that allows a business to lease a company car by simply making a fixed monthly payment for a period that is typically between 2 and 4 years. At the end of the lease contract, the business returns the old company car and obtains a new car and a new lease contract.

In addition to the big VAT benefits the other advantages are:

• the business spends significantly less each month (as much as 60%) than it would need to spend on a loan or ‘hire purchase’ (it gets a ‘bigger bang for its buck’);
• there is no need to arrange or negotiate to sell the vehicle when a new one is required;
• there is no market value risk arising from the vehicle because it does not need to be sold in the open market at any point;
• the business can select the exact requirements online and have them delivered;
• it is certainly cheaper than ownership over the long term if the business needs to run and replace new vehicles more frequently than every five years or less;
• the business can include all costs of maintenance and services in the monthly price;
• the road fund licence will always be included for the first year of the lease contract and often for the life of the contract; and,
• vehicles can be kept relatively new and this promotes a positive, successful image of the business.

Given the above benefits, contract hire is also particularly useful for businesses looking to lease a van

Thank you to Accounting Web for this article: http://www.accountingweb.co.uk

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What is P11D?

What is P11D?

A taxing issue

The P11D value of a car will help shape an employee’s tax contributions and is an important consideration
for fleets.

By law, at the end of each tax year you must give Her Majesty’s Revenue and Customs (HMRC) particulars of any expenses payments, benefits and facilities provided to:

  • each employee or director earning at a rate of £8,500 a year or more, and
  • each director earning at a rate of less than £8,500 a year, unless they are

– a full time working director with no material interest in the company, or
– a director of a charity or non-profit making concern.

As a result the P11D form should include details of cars made available for private use and the total car benefit charge.

The list price of a car will usually be the UK list price of the car on the day before the date of first registration, including VAT, car tax (where appropriate), delivery charges and number plates.

If the car had no list price when it was first registered, use the notional price. This is the price that might reasonably expected to be the car’s list price if its manufacturer, importer or distributor had published a list price for an equivalent car for single retail in the UK.

Accessories must be added at their list price, including VAT, fitting and delivery charges.

Capital contributions (payments made by the director/employee towards the cost of the car and accessories) are deducted from the price of the car and accessories (maximum deduction £5,000).

The price of the car and accessories, less any capital contributions, is limited to £80,000.

This figure is multiplied by the ‘appropriate percentage’ to give the car benefit charge for a full tax year. The appropriate percentage for cars registered on or after January 1, 1998 depends on the carbon dioxide (CO2) emissions of the car and the type of fuel used.

For further information of P11D and other company car tax issues, visit Her Majesty’s Revenue and Customs (HMRC).

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