New time limits for tax claims and enquiries came into force for Corporation Tax, Employers’ PAYE, the Construction Industry Scheme, income tax and Capital Gains Tax with effect from April this year.
The previous six-year window has been cut to just four years and other HM Revenue and Customs (HMRC) powers have been reduced.
Under the new rules for enquiries, HMRC can only go back 4 years unless they can prove the taxpayer has been negliglent (when they can go back 6 years). The old right to go back 20 years can only be applied when it is proved that the taxpayer deliberately set out to evade paying tax.
Of course, the rules also mean that a taxpayer can only go back 4 years if he discovers a mistake in previous years which meant he overpaid tax.
Tuesday, 18 May 2010
Monday, 10 May 2010
Company Directors using their own car for business purposes
I am often asked for the best way to deal with motor vehicle expenses within a limited company. The method below is tax-efficient and avoids the need to complete P11D returns. The method is suitable for all employees.
As employees, Company Directors, using their own vehicles, can charge the company 40p per mile (for first 10,000 miles in the tax year 6th April to 5th April) and 25p thereafter. The company cannot claim any other costs in respect of the car. So Directors pay for everything (except servicing - see below) privately and then use "an expense claim" to claim for the cost of using their private car for work purposes (at 40p and 25p). A log of business mileage must be kept.
For VAT-registered businesses, there are a couple of opportunities that are beneficial and often overlooked.
Firstly, when the company re-imburses a Director for use of the vehicle, it is possible to reclaim VAT on the "deemed fuel element" - this depends on the car type and engine size. It works out at about 1p of VAT per mile. The Company needs to keep evidence that the employee has paid VAT on petrol, so get a VAT receipt for all the fuel that is bought and attach it to the expense claim (just as evidence that VAT was incurred - you do not use the figures on the receipts at all). In the accounts, 39p would be charged as motoring costs and 1p as recoverable VAT.
Secondly, if the car has to be serviced then the invoice should be addressed to the company so that the company can reclaim VAT on the bill. The Director then pays the VAT exclusive bill back to the company.
As employees, Company Directors, using their own vehicles, can charge the company 40p per mile (for first 10,000 miles in the tax year 6th April to 5th April) and 25p thereafter. The company cannot claim any other costs in respect of the car. So Directors pay for everything (except servicing - see below) privately and then use "an expense claim" to claim for the cost of using their private car for work purposes (at 40p and 25p). A log of business mileage must be kept.
For VAT-registered businesses, there are a couple of opportunities that are beneficial and often overlooked.
Firstly, when the company re-imburses a Director for use of the vehicle, it is possible to reclaim VAT on the "deemed fuel element" - this depends on the car type and engine size. It works out at about 1p of VAT per mile. The Company needs to keep evidence that the employee has paid VAT on petrol, so get a VAT receipt for all the fuel that is bought and attach it to the expense claim (just as evidence that VAT was incurred - you do not use the figures on the receipts at all). In the accounts, 39p would be charged as motoring costs and 1p as recoverable VAT.
Secondly, if the car has to be serviced then the invoice should be addressed to the company so that the company can reclaim VAT on the bill. The Director then pays the VAT exclusive bill back to the company.
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