Category: HMRC

Is It Time to Electrify Your Double Cab Pickups?

Posted on | by Jade Donno

Understanding the Changing Tax Landscape

Current Tax Benefits: A Favorable Position

Double cab pickups are the backbone of the construction industry, serving as both reliable haulers for equipment and convenient transportation for workers and their families. Yet, looming changes in tax regulations could reshape the landscape for these indispensable vehicles.

The Impact of Tax Changes

Currently, double cab pickups enjoy favorable tax treatment, including a standard benefit-in-kind rate set at £3,600, plus £688 for fuel, leading to a tax bill of £857.60 for basic rate taxpayers and £1,715.20 for those in the higher tax bracket. Additionally, companies can fully deduct the cost of these vehicles from their taxable profits thanks to 100% Capital Allowances. However, starting from July 1st, significant tax changes will come into effect, subjecting double cab pickups to similar tax assessments as cars. This shift includes considering CO2 emissions ratings, which could substantially increase taxes and reduce capital allowances.

Navigating Tax Implications: A Case Study

Take, for example, purchasing a Toyota Hilux Active, priced at £34,145 including VAT. Under the current tax regime, there are significant tax savings for both the company and the employee due to VAT recovery and full capital allowances. However, post-change, the tax implications become much more burdensome, with capital allowances reducing to just 6% annually.

Exploring Alternatives: Electrification of Fleet

So, what’s the solution? It might be time to consider electrifying your double cab pickup fleet. Electric vehicles (EVs) are currently treated more favorably in terms of taxation, and although there’s no guarantee, there’s a possibility that future government policies may continue to support EV adoption.

Weighing the Options: Financial and Environmental Considerations

With the impending tax changes, it’s essential to weigh the benefits of purchasing under the existing tax regime against the potential long-term financial and environmental advantages of electric vehicles. While the current rules apply to purchases made before July 1st, 2024, until April 5th, 2028, it’s crucial to consider the broader shift towards electrification and potential changes in legislation that could impact the cost-effectiveness of maintaining a diesel-powered fleet.

Further Guidance and Resources

To dive deeper into the tax implications and allowances, refer to the official guidance at HMRC’s Employment Income Manual.

In Conclusion: A Shift Towards Sustainability

In conclusion, the changing tax landscape suggests that now might be the time to rethink your double cab pickup fleet and consider transitioning to electric vehicles for a more sustainable and financially sound future.

For more detailed information on the tax implications and allowances, please refer to the official guidance at HMRC’s Employment Income Manual.

HMRC Time To Pay Arrangements

Posted on | by Jade Donno

Navigating HMRC Time to Pay Arrangements: A Lifeline for UK Businesses

In the complex world of business finance, one of the challenges UK businesses often face is managing their tax obligations effectively. The HM Revenue and Customs (HMRC) understands that businesses sometimes encounter cash flow difficulties, making it hard to pay their tax bills on time. To assist, HMRC offers a “Time to Pay” (TTP) arrangement, a vital tool for businesses needing extra time to pay their taxes. This blog explores what TTP arrangements are, how they work, and why they might be a critical solution for your business.

What is a Time to Pay Arrangement?

Simply it’s an agreement between a business and HMRC to pay outstanding taxes over an extended period. This facility is designed to help businesses struggling with temporary financial difficulties to spread their tax payments, thereby avoiding penalties and helping to manage cash flow more effectively.

Eligibility and Application

To be eligible for a TTP arrangement, businesses must:

  • Have existing tax liabilities.
  • Be in genuine temporary financial distress.
  • Be able to demonstrate that they can pay off the debt in the foreseeable future.

The application process typically involves contacting HMRC, discussing your financial situation, and proposing a payment plan.

Types of Taxes Covered

TTP arrangements can cover various types of taxes, including:

  • Corporation Tax
  • PAYE and National Insurance Contributions
  • VAT
  • Self-Assessment Tax

The Benefits of Time-to-Pay Arrangements

Cash Flow Management

One of the primary benefits of a TTP arrangement is improved cash flow management. By spreading tax payments over a longer period, businesses can maintain operational liquidity and avoid the strain of a lump-sum payment.

Avoiding Penalties

Timely negotiation of a TTP arrangement can help businesses avoid late payment penalties and interest charges, which can accumulate quickly on unpaid taxes.

Maintaining Good Standing

Staying compliant with tax obligations is crucial for any business. A TTP arrangement helps maintain a good relationship with HMRC and ensures compliance.

How to Approach a Time to Pay Arrangement

Early Communication

It’s crucial to contact HMRC as soon as you anticipate cash flow problems. Early communication is key to negotiating a feasible and realistic payment plan.

To set up a Time to Pay (TTP) arrangement with HMRC, you can use the following contact details:

  1. For Self-Assessment: Call 0300 200 3822. The Self Assessment Payment Helpline is open Monday to Friday from 8 am to 6 pm.
  2. For Limited Companies: Contact HMRC’s Payment Support Services on 0300 200 3835.

Accurate Financial Information

When negotiating a TTP arrangement, be prepared with accurate and detailed financial information to support your case. This includes cash flow forecasts, business plans, and an explanation of what caused the financial difficulties.

Realistic Proposals

Propose a payment plan that your business can realistically meet. Overly ambitious plans that lead to default can complicate future negotiations.

HMRC’s Time to Pay arrangements can be a lifeline for businesses facing temporary financial difficulties. They provide a structured and manageable way to meet tax obligations without crippling the business’s cash flow. However, it’s essential to approach these arrangements with a clear understanding of your financial situation and a realistic plan for repayment. Regular communication with HMRC and adherence to the agreed payment schedule are critical to the success of these arrangements.

For businesses struggling to manage their tax liabilities, a TTP arrangement can offer the necessary breathing space to regain financial stability. Always consider seeking advice from an accountant to navigate the process effectively and ensure that the proposed plan aligns with your business’s overall financial strategy.

jade and paul in a meeting

Are You in the Crosshairs of the Associated Company Tax Rates?

Posted on | by Jade Donno

We’re back with another blog post and this time we’re diving into a topic that isn’t everyone’s cup of tea – taxes. But don’t worry, we’re here to make it as enjoyable and straightforward as possible. Strap in and let’s demystify the new corporation tax rules together.

What are the changes?

As of April 1st, 2023 (and no, it wasn’t an April Fool’s prank), there have been some significant changes in the corporation tax laws. Here’s the lowdown:

  1. Companies with profits that are playing a bit of hide and seek and total less than £50k will continue to be taxed at the friendly rate of 19%.
  2. Those with profits feeling a bit more confident, between £50k and £250k, will be greeted by a still reasonable tax rate of 26.5%.
  3. And for those brave souls whose profits exceed £250k, they’re looking at a flat rate of 25%.

Now, you might be wondering about this £50k threshold we mentioned. It’s not as roomy as it first appears. Much like sharing a dessert, this threshold needs to be split between your company and any other associated companies. The effect? Well, your slice of the pie could be smaller than you initially thought.

Fear not, your trusted accounting partners, should be on the case and we’re here to guide you through this labyrinth. Your accountant will need to know about any other companies you’re involved with, either as a shareholder or director. The same goes for any companies your family members are involved with. This isn’t us accountants just being nosy, promise! It’s all to ascertain whether the associated company rules apply to you and potentially other connected businesses.

We understand that these changes may feel a bit like navigating uncharted waters. If this is going to cause any tax-related stress, rest assured that we’re prepared to assist. We can work with you to plan the most tax-efficient course.

So, let’s sail through these tax changes together. As always, we are committed to lightening the load of tax law changes and making the journey as smooth and pleasant as possible.

Stay tuned for more updates and remember to keep those smiles on. After all, nothing is as certain as change… and taxes!

Mini Budget 2022

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Last week, as part of the mini-budget, the government began announcing help for small businesses. This blog gives you the details of what matters and how this could impact your business.

At a top level, the mini-budget, the government’s Growth Plan and announcements on energy caps are very good news for small businesses. Excuse the pun, but in many ways, the government has put its hand into its pocket to keep the lights on for small businesses this winter. It’s also changed decades of fiscal discipline and if you believe the media and political pundits it is a very risky move. After all, the government still needs to pay back what it borrowed to support individuals and businesses during the worst of Covid-19.

At a glance, these are the changes that impact you and your small business:

Income tax: Not including Scotland

  • The basic rate has been cut by 1p to 19p from April 2023.
  • From April 2023, the higher rate of Income Tax, 45%, has been scrapped.

Corporation tax: 

  • The planned increase in corporation tax from 19% to 25% has been scrapped.
  • This means that from April 2023, the rate will remain at 19% for all firms.

National Insurance: 

  • The 1.25% increase in National Insurance introduced in April 2022 has now been scrapped. I.e. from November 6th 2022.
  • The Health and Social Care Levy due to be introduced in April 2023 has been scrapped.
  • No change to the threshold that individuals pay National Insurance, i.e. £12,570
  • Eligible businesses still get up to £5000 in employment allowance to reduce their annual National Insurance Liability.

Dividend tax: The 1.25% increase to rates introduced in April 2022 has been reversed from April 2023

Annual investment allowance: The temporary increase from £200k to £1m has been made a permanent increase. This gives 100% tax relief to businesses on their plant and machinery investments up to £1m.

IR35 rules changed: The 2017 and 2021 changes to off-payroll working are to be repealed from April 2023. This means workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.

Company Share Option Plan: From April 2023 companies can now grant up to £60k (up from £30k) of share options to each eligible employee.

Seed enterprise investment scheme (SEIS):

  • The amount a company can raise under SEIS has been raised from £150k to £250k
  • The amount an individual can invest in SEIS shares has been doubled from £100k to £200k
  • The scheme has been extended to companies with gross assets under £350k

Energy price guarantee and Energy Bill Relief Scheme:

Businesses will pay no more than £211 per megawatt hour for electricity and £75 per megawatt hour for gas. This applies to all energy supply contracts entered into after 1st April. The energy companies will apply the discount. The energy bill relief scheme will operate until March 31st 2023 and potentially be extended after this date for businesses in certain sectors.

Under the energy price guarantee, the highest amount domestic households will have to pay is 34p per kWh of electricity and 10.3p per kWh of gas. The standing charge – the fee customers pay for being connected to the energy grid – will be 46p per day for electricity and 28p per day for gas. This energy price guarantee will last 2 years. A typical household can expect to pay about £2500 a year for their energy.

Investment zones: These new investment zones will benefit from tax incentives, planning liberalisation and wider support for the local economy.

VAT-free digital shopping scheme for visitors to the UK: Visitors to the UK will be able to claim back VAT on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage. The date for this scheme to go live is currently unknown.

What you need to do now?

Payroll

If you run your own payroll, then you will need to check that your payroll software provider will be implementing the changes to National Insurance in time for November. If we run your payroll, we will ensure that the changes happen seamlessly.

Personal tax return

The changes to income tax rates and national insurance take effect for the 2022/2023 tax year. They will not impact your personal tax bill for the 2021/2022 tax year. With 2 rates of National Insurance, this will make your 2022/2023 personal tax return more complicated than normal. Please contact us if you would like us to do your personal tax return for the 2022/2023 tax year.

Do a new budget and reforecast your cashflow

The energy price guarantee and changes to employers’ national insurance rates mean that your business’s costs have materially changed for the year. Please contact us if you want help to see how this changes your business’s cost structure going forward.

Revisit your personal and business tax planning strategy

This was anything but a mini-budget. It is a massive change in fiscal policy and direction. This means you may need to rethink your personal and business tax planning strategy going forward. Changes, in particular to the SEIS scheme, may mean there are more tax planning options now open to you and your business. Once again get in touch with us if you have any questions or need help.

New National Insurance threshold comes into effect from 6th July 2022

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Back in his Spring Statement in March of 2022, then Chancellor Rishi Sunak announced significant changes to National Insurance. The first of which came into effect in April when NI contributions were raised from 12% to 13.25%.

What is changing in July?

This month sees some respite however with the implementation of Sunak’s second change; a raise of the primary threshold for National Insurance. From July 6th this has been raised from £9880 to £12,570, bringing it in line with the personal allowance for income tax for the first time.

This change means that anyone earning less than approximately £35,000 will pay less National Insurance this year, and employees will see this change reflected in their pay this month. The Prime Minister has stated that this will mean the average worker will receive a tax cut of £330 a year. If you earn below this threshold then you will no longer pay National Insurance contributions at all. If you are a higher earner however, you will still be paying more National Insurance than you were last year.

Will this help the cost-of-living crisis?

Taxes are still at their highest rate for 40 years and the cost of living crisis continues to grow. With a new Chancellor in place it will be interesting to see what, if any, changes he makes to ease the pressure on low and middle earners. We will have a full report of the Autumn statement when it is given, and in the meantime will continue to update you as soon as anything changes.

pregnant lady with heart

Did your pregnancy affect your claim?

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Ask HMRC to verify you had a new child which affected your eligibility for the self-employed income support scheme. 

If you are self-employed or a member of a partnership, and having a new child affected the trading profits or total income you reported for the tax year 2018 to 2019, use the HMRC form to ask them to verify that you had a new child.

If you are already eligible for the grant based on your 2016 to 2017, 2017 to 2018 and 2018 to 2019 Self-Assessment tax returns, how HMRC will work out your grant amount will not be affected.

If you are not already eligible you can ask HMRC to check if you had a new child which either:

  • affected your trading profits or total income you reported for the tax year 2018 to 2019
  • meant you did not submit a Self-Assessment tax return for the tax year 2018 to 2019

For this scheme having a new child is any of the following:

  • being pregnant
  • giving birth (including a stillbirth after more than 24 weeks of pregnancy) and the 26 weeks after giving birth
  • caring for a child within 12 months of birth if you have parental responsibility
  • caring for a child within 12 months of adoption placement

You must have been self-employed in the tax year 2017 to 2018 and have submitted your Self-Assessment tax return on or before 23 April 2020.

You must also meet all other eligibility criteria.

a Van and a car

Is your van actually a car? – The answer may surprise you.

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“Should I buy a car or a van” is a question we frequently get asked at 1 Accounts. Our recommendation is usually van. This is because you can claim back the VAT and the taxable benefit in kind is usually much less than a car (unless electric).

As the benefits of buying a van outweigh the benefits of buying a car, It is important that your van is actually classified as a van. In our opinion HMRC have been fairly “woolly” over the definition. In most cases if the vehicle is capable of transporting goods and has a 1 tonne pay load it has been treated as a van.; regardless of if there are seats behind the driver.

HMRC have a published list of what they determine to be a car or a van. You will see in some cases that the pack purchased can affect the classification:  However due to the developments in the recent Coca-cola case these classifications may come under scrutiny from HMRC.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/428510/Car_derived_Van_updateMay2015.pdf 

The coca-cola case

Coca-cola provided their employees with vehicles based on a panel van design, however these vehicles had a second row of seats behind the driver. Employees could use them for both personal and work purposes. Coca-cola argued that these vehicles were vans. HMRC said they were cars.

The first tier tribunal determined that because the vehicles were multi-purpose they couldn’t be considered a van. Therefore by default they had to fall into the ‘car’ bracket and should be taxed accordingly.

Classification

Your van could be classed as a car if:

  • It has a row of seats behind the driver
  • It has a dule purpose eg. It can carry goods and passengers

If you van has these things you will seriously need to consider if it is used as a van or a car. We believe that now it has come to light, HMRC will be looking more closely at the classifications and will be taking a much harsher approach than before.

The judgement as you can see from this link is extensive and has tax implications for both Tax and VAT.

https://www.judiciary.uk/wp-content/uploads/2020/07/HMRC-v-Payne-Ors-Approved-Judgment-002.pdf

We recommend that you review your fleet and make the necessary adjustments now.

Business bounce back loan - boy on trampoline

Business Bounce Back Loans

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Business Bounce Back Loans – what are they and should you apply for one?

Since the scheme launched in May 2020 (just 3 months ago), more than 860,000 bounce back loans have been issued. This means that thousands of small businesses who are struggling due to the coronavirus have applied for and received financial help; help of which will hopefully get them through this turbulent time. So what are bounce back loans? Here is what you need to know about them including a list of questions to help you decide whether you should apply for one.

Business Bounce Back Loans

While there has been a lot of financial support being dished out due to the impact of the Coronavirus, there are small businesses that can’t access this funding quickly enough; self-employed people who don’t qualify for the Self-Employment Income Support Scheme, and limited company directors who have fallen through the cracks.

For these businesses and individuals, the ones who aren’t covered by other schemes, bounce back loans are a saving grace.

So what are bounce banks loans?

Bounce back loans are 100% government-backed loans which include the following:

  • Loan amount from £2,000-£50,000 or 25% of your annual turnover (whichever is lower)
  • No interest charged in the first 12 months (the Government covers the first year)
  • No repayments needed in the first 12 months
  • After 12 months, all banks charge a fixed 2.5% interest rate/year
  • 6-year loan with no early repayment charges
  • Straightforward application and quick access to funds

Obviously, your business will always remain responsible for the repayment of the whole debt amount, but bounce back loans will provide you with significant support over the next 12 months.

Should I apply?

To help you decide whether you should apply for a bounce back loan, here are some questions for you to consider. If your answer is yes to a number of these questions then you are eligible to receive support.

  • Am I a UK-based business that has been impacted by Covid-19?
  • Was my business established before 1 March 2020?
  • Is this the only support that I am applying for (with the exception of personal support)?
  • Do I need financial help in addition to the self-employment income support grant and universal credit?
  • Do I need to repay existing finance, i.e. lenders?
  • Do I need help to pay investments or working capital for the business – including bills, running costs and wages?
  • Do I need capital immediately (within 24 hours)?

Things to note

If you would like to apply for a bounce back loan, all you have to do is contact a bank directly and fill in a short online application. You will need details of your annual turnover, your account number, the amount you wish to borrow, a copy of your tax return, and proof that your business has been negatively impacted by Covid-19.

In terms of repayments, there are no interest or repayments in the first year but after those 12 months, you will need to make 60 repayments of the amount borrowed. Unlike a personal loan, however, you won’t have fixed payments. Each month, you’ll repay 1/60th of the capital plus the interest that has accumulated that month. This means that the amount you owe will decrease over time and in turn, your repayment amount will decrease too.

If you would like to know more about the Business Bounce Back Loans book in a no-obligation free meeting TODAY!

Have you got a government gateway?

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The help and advice that is available from the Government is forever changing. This is the latest update we have on how to apply for the self-employed grant. 

For those who are eligible, you will receive an EMAIL, not a letter as we had thought. Be aware that there are lots of phishing emails out there, HMRC’s email does not ask you to click on anything.

If you are unsure if you are eligible please follow this link –  https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme. Please make sure to put capital letters for your NI number otherwise it will fail. If you believe you are eligible but the calculator is failing, please get in touch and we will try and help.   

If you qualify you will be able to claim from the 13th/18th of May. To claim you will need a Government Gateway! 

If you do not have one, please follow these steps to set one up. We recommend you do this NOW to avoid any delays. 

https://www.gov.uk/personal-tax-account

If you have forgotten your username and/or password you can get these reset with HMRC. 

https://www.tax.service.gov.uk/account-recovery/lost-user-id-password/check-email?state=5eb2c2442100008e90c6e413&ui_locales=en-GB 

From what we have seen, we will not be able to claim your grant through our gateway. This could change, but to avoid the delays in getting your grant please make sure your gateway is set up. 

If you need help applying please email jade@1accounts.co.uk 

1 Accounts Haverhill Capital Gains Tax advice when selling your house.

Capital Gains rules are changing!

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Capital Gains rules are changing!

If you are a property investor or “accidental” landlord this is the blog for you. From the 6th of April 2020 the changes to Capital Gains tax rules will affect the sale of second homes and rental properties.

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Capital Gains Tax

Capital Gains Tax is paid at the following rates:

  • 18% for the basic rate taxpayer
  • 28% for the higher rate taxpayer

The current rule means that if you sell your property in the tax year, you will pay your Capital Gains Tax in the January after it is declared on your tax return. The new rule means that you need to declare the sale to HMRC and pay the Capital Gain within 30 days of the sale. This will need to be carefully planned by unsuspecting landlords.

Get your house in order

No doubt, there will be penalties from HMRC with those who do not comply. We are keeping our fingers crossed that letting agents have informed their Landlords of these new changes.
If you are a property investor and are in the position where you have not declared your rental income, please take a look at our recent blog – “Have you received HMRC’s Love Letter?”

PPR relief

Other changes include PPR (Principle Private Residence) Relief. This is the relief that enables taxpayers to sell their homes without having to pay Capital Gains Tax. If you buy and move into a second home, the final period of exemption for PPR relief is going to be reduced from 18 months to 9 months.
This applies to Landlords that let privately. However, with the new rules starting in April and the restriction on mortgage interest, trading through a Limited Company could be the answer for property investors for the following reasons:

  • 19% Corporation Tax if you sell the property, rather than 28%.
  • Full tax relief on the interest of the loan

Pros & Cons

As with most things there are pros & cons. We can help you make informed decisions on how you want to invest and join the exciting world of being a Landlord. Despite HMRC doing their best to penalise Landlords, with the correct set up and letting partners, renting property can be very rewarding.