Tag Archives: benefits in kind

EXEMPTION FOR TRIVIAL BENEFITS IN KIND

The Office of Tax Simplification has made a number of recommendations to the government to simplify the tax rules for reporting benefits in kind and expenses paid on behalf of directors and employees.

One recommendation was to replace a number of extra statutory concessions and legislate that trivial benefits in kind, where the cost to the employer is no more than £50, will not need to be reported in future and will be exempt from tax. HM Revenue and Customs raised concerns that some directors of family companies might abuse the new rules and have insisted that the exemption should be limited to £300 per annum in the case of directors and family members of such companies and this has now been included in the draft Finance Bill to be introduced from 6 April 2016.

The exemption is expected to cover the provision of small gifts to employees and former employees such as flowers on the occasion of a wedding or funeral and should not be in recognition of particular services performed by the employee in the course of their employment.

Please get in touch with us for further guidance on which benefits will qualify for this new exemption.

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Company Car Tax Benefit In Kind Rate Change

From April 2015

The 5 year exemption for zero emission cars and the lower rate of 5% for ultra-low emission (1-75gm/km) car has ended)

From 2015/16 two new bands provide for a 5% rate for cars with CO2 emissions of 0-50 gm/km and a 9% band for cars with CO2 emissions of 51-75gm/km, etc up to a new maximum of 37%. To summarise from 6.04.2015 the rules are:

  • 0-50gm/km* – 5%
  • 51-75gm/km* – 9%
  • 76-94gm/km* – 13%
  • 95-99gm/km – 14%
  • graduated increases of 1% per 5gm.km up to a maximum, including the diesel supplement of 37%

NB – where the emissions do not end in a 5 or 0, round down to the nearest 5 or 0 but not in the brackets with a *

From April 2016 onward

From April 2016 the Government has removed the 3% diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars.

In 2016/17 the appropriate percentages of the list price subject to tax for the 0-50gm/km band will be 7% and 11% for the 51-75gm/km band.  The rate will be 15% for cars with CO2 emissions of between 76-94 gm/km, 16% for 95-99gm/km, etc. up to the new maximum of 37%

From April 2017 onwards

In 2017/18 the appropriate percentages of the list price subject to tax for the 0-50gm/km band will be 9% and 13% for the 51-75gm/km band.  The rate will be 17% for cars with CO2 emissions of between 76-94 gm/km, 18% for 95-99gm/km, etc. up to the maximum of 37%

From April 2018 onwards

In 2018/19 the appropriate percentages of the list price subject to tax for the 0-50gm/km band will be 13% and 16% for the 51-75gm/km band.  The rate will be 19% for cars with CO2 emissions of between 76-94 gm/km, 20% for 95-99gm/km, etc. up to the maximum of 37%

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FORMS P11D DUE BY 6 JULY

The deadline for filing the 2014/15 returns of benefits and expenses paid to employees is 6 July 2015. Note that there can be significant penalties for incorrect returns so they need to be completed with great care. Remember that unless the employer holds a dispensation from HMRC, employees’ and directors’ reimbursed expenses (such as travel and subsistence) also need to be reported. We can assist you in completing the forms and to put in place control procedures that will satisfy HMRC requirements to grant a dispensation from reporting certain expenses

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FORMS P11D DUE BY 6 JULY

As mentioned in the tax diary, the deadline for filing 2013/14 returns of benefits and expenses paid to employees is 6 July 2014. Significant penalties can be incurred for incorrect returns, so great care is required. The most common benefits in kind that need to be reported are company cars and loans of over £5,000 on beneficial terms. Unless the employer holds a dispensation from HMRC, employees’ and directors’ reimbursed expenses (such as travel and subsistence) also need to be reported.

We can assist you in completing the forms and to put in place procedures that will satisfy HMRC requirements to grant a dispensation from reporting certain expenses.

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100% TAX WRITE-OFF FOR A LOW EMISSION CAR

If you buy a new car for your business that has CO2 emissions of no more than 95g/km, you can claim a full deduction against your business profits. There are approximately 30 cars that fall into this category, but the list is growing.

If you run your business as a limited company, the private use element is reflected in an income tax charge as a benefit. This is also based on CO2 emissions, but the tax charge is low to reflect low emissions.

If you are a sole trader or partner, the private use element is reflected simply by a reduction in the 100% tax write-off. For example, 10% private use means that 90% of the cost is tax deductible. If you reduce your self-employed activities while still owning the car (perhaps through planning a phased retirement), you can create a tax opportunity. Upon selling the car, the sale proceeds are charged to tax, as you originally obtained tax relief on the full purchase price. This charge to tax is then reduced by reference to private use on what is called a just and reasonable basis. For example, an increase in private use to 25% by the time the car is sold can result in a tax charge on only 75% of the proceeds, rather than the 90% you might have thought.

HMRC provide guidance on this and we will always be ready to get the best tax deal for you in these circumstances.

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