Technical Pages
Motor Cars
Owning – Currently the tax legislation discriminates against any employee or Director using a car for work, whether it is owned by the employee or the employer. As a general rule if your private mileage is high and the car itself is in a reasonably low 'emissions' category then the balance swings in favour of having a Company car.
Running - For cars owned privately a person is not treated as having received a benefit in kind if they are paid no more than the following rates by their Employer. Incidentally if they receive less than these rates they can obtain tax relief on the difference.
For the first 10,000 – 45p per mile
Excess over 10,000 miles – 25p per mile
Also any unincorporated business, which has a turnover under the VAT registration threshold, can also elect to use this method to claim for their car expenses.
Recent case law has changed the tax relief for the self-employed. To obtain tax relief when traveling from home it must also be your actual place of work, and it's not sufficient to just be the base for your business. Tax relief continues to be available for itinerant workers who regularly have different places of work.
Wills & Inheritance Tax
Every person has an allowance, currently £325,000, which, if it has not been utilised in the seven previous years prior to death, becomes the tax free limit on death. Since April 2018 there has been an additional allowance specifically for ones residence sinceApril 2020 has risen to £175,000.
For very many years there has in addition, been an annual gift allowance of £3,000 per donor. There are however four similar, but less well known, additional reliefs:
i) An additional £3,000 if the allowance for the previous tax year has not been utilised
ii) Gifts of £250 to any other person, with no limit on the number of people.
iii) Any regular gifts made out of income, which allow you to retain sufficient income to maintain your standard of living.
iv) A gift of any amount, to any person, provided that you then survive a minimum of seven years.
There are two other relatively unknown facts, which relate more to Wills than Inheritance tax:
1. If you own your residence jointly, or indeed any other asset such as bank account, as 'joint tenants' with your spouse or partner (as many people do) the property or other asset cannot be bequeathed to anyone except the other joint owner. However a change to a 'tenancy in common' could resolve the situation.
2. After your death, if all the beneficiaries of your Will agree, your Will can be re written according to their wishes. There are special rules for child beneficiaries.
Business and Private Records
Unincorporated businesses should keep records for five years following the filing deadline for a Tax Return. For example ones Accounts for say the year from 1/4/22 to 31/3/23 (forming the basis of a 2023 Tax Return) have a filing deadline of 31/1/24. Five years from 31/1/24 is 31/1/29. Individuals must also retain supporting documentation for all entries on their personal Tax Returns for this same period of time. Limited Companies should keep records for six years from the end of an accounting period.
Limited Companies
To form a Company or not?
The largest change in taxation of dividends for many years took place in April 2016, when a 7.5% tax rate was introduced. The marginal rate of tax for basic rate and higher rate taxpayers, after the £1,000 allowance (£500 from April 2024), is now 8.75% and 33.75% respectively, after having paid 19% Corporation tax (25% if profits over £250k). The difference compared with unincorporated businesses generally does not on it's own justify incorporation, although a top rate of Corporation tax of 19% or 25%, with no upper limit, does make incorporation attractive if profits are retained in the Company. However at some time in the future more tax will have to be paid to extract the money personally.
No decision should ever be taken on this limited amount of information, particularly as there can be commercial reasons why incorporation is essential.
VAT Registration
Any business whose taxable supplies exceed £85,000 in any period of twelve months must register for VAT within one month of the end of that period. Conversely if in any period of twelve months the turnover falls below £83,000 then the business can deregister from VAT. Strictly speaking it is the individual, or group of individuals who must register (or deregister) and not the actual business. Furthermore the turnover of all businesses activities must be included when calculating the limits.
Since April 2019 all VAT registered businesses with over £85,000 annual turnover of taxable supplies must keep their records on a computer. There must also be dedicated software to submit the quarterly figures to HMRC.
Other relevant limits are £1.35m as a maximum turnover in order to join the Cash Accounting scheme. The equivalent entry for the Flat rate scheme is £150,000.
The Data Protection Act
To be genuine renewal notices must have been sent from Water Lane at Wilmslow in Cheshire. Their internet address is www.dpr.gov.uk The registration fee is a fixed £35, which is significantly less than the spurious invoices being issued by other organisations purporting to be connected with the Data Protection registrar.
A firm has to register if they hold or process records, containing data, which could identify virtually any personal information about any individual. It generally includes only data held on a computer although it could include data held on a sophisticated manual filing system. There are several exemptions from registering, the most important is for firms holding data only for the purposes of internal accounting and management. There are very strict controls about what information can be held, and who can access it. For example the exemption is lost if other details are held about individuals such as holding information from a Credit reference agency. The rules have been strengthened since May 2018 and positive permission must be sought prior to communication with an individual.