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Some cars only qualify for 6% tax relief now
The latest Finance Act has reduced the tax writing down allowance for motor cars that emit more than 110 grams of CO2 from 8% to just 6% on a reducing balance basis from April 2019.
For company cars the vehicle is included in the capital allowance “special rate” pool which means that even when the car is sold the proceeds are deducted from the pool and the 6% allowance continues until the balance is written off.
It may be more advantageous to lease such a vehicle, but please check with us first.
Research carried out by banking group Close Brothers has suggested that almost two thirds of UK small businesses are 'unaware of the Annual Investment Allowance' (AIA).
The majority of businesses are able to claim a 100% AIA on the first portion of expenditure on most types of plant and machinery (except cars). The AIA applies to businesses of any size and most business structures, but there are provisions to prevent multiple claims.
The maximum amount of the AIA depends on the date of the accounting period and the date of expenditure. From 1 January 2019, the AIA is £1 million for two years. Thereafter, it will revert to £200,000.
The research also revealed that 58% of small and medium-sized enterprises (SMEs) were unaware that the government increased the AIA in the 2018 Autumn Budget. Meanwhile, just 13% of firms stated that they plan to increase investment in 2019 in order to take advantage of the rise.
Commenting on the matter, Neil Davies, CEO of Close Brothers, said: 'The AIA provides significantly faster tax relief for plant and machinery. However, it's clear that more needs to be done to get the message out to business owners because the AIA was always intended as an economic stimulus by the government.'
HM Revenue & Customs (HMRC) is trialling a new trigger, which is intended to improve the accuracy of employees’ PAYE tax codes.
According to HMRC, as many as half a million tax codes being used by employers across the UK could be incorrect, leading to employees either overpaying or underpaying tax.
To address the problem, HMRC is making changes to dynamic coding, which began its rollout in July 2017.
Dynamic coding is designed to make use of the additional information HMRC is now receiving from employees and employers to recalculate pay estimates during the course of the tax year.
Now HMRC is adding mismatches between its records and those of employers to the list of events that can trigger a recalculation.
As part of the initiative, HMRC is also placing a renewed emphasis on ensuring that employers complete new starter checklists properly and will be visiting the 100 worst offending employers when it comes to failing to complete the new starter process.
HM Revenue & Customs (HMRC) has updated its VAT notice regarding Making Tax Digital (MTD) for VAT to relax several of the digital recordkeeping requirements.
One of the changes, secured with the help of the Chartered Institute of Taxation (CIoT), relates to purchase invoices from suppliers.
It has become apparent in sectors that receive a high number of purchase invoices from the same company, that they are having to file multiple almost identical records, which is becoming very onerous.
MTD for VAT requires each individual supply or invoice to be entered as a new digital record.
However, a relaxation to the rules has been agreed, which will enable businesses to capture their digital records information from supplier statements, rather than from each individual invoice, as long as “all supplies on the statement are to be included on the same return and the total VAT charged at each rate is shown”. This change will only apply to purchases and not sales.
HMRC has also agreed to review the requirement for petty cash. Currently, the strict requirement is to record each individual supply, or at least each individual invoice/receipt, within a company’s digital records.
Instead, the updated VAT notice says that petty cash transactions can now be added up and summary totals entered as an alternative digital record.
The notice states: “This applies to individual purchases with a VAT-inclusive value below £50 and the total value of petty cash transactions recorded in this way cannot exceed a VAT-inclusive value of £500 per entry.”
The third and final relaxation of the rules relates to charity fundraising events run by volunteers. Under the new guidance the total values of supplies made can be entered as a single transaction, and similarly for supplies received.
HMRC has told the CIoT that it will not currently be seeking to apply record-keeping penalties where a business is clearly trying to comply with the requirements of MTD. This is in line with their previous promise of providing a ‘soft landing’ period in the first year of the new digital tax regime.
The annual tax on enveloped dwellings (ATED) is a tax that applies, in the main, to companies owning residential property which is valued at more than £500,000.
The tax only applies on properties that are classed as ‘dwellings’. This is a property where all or part of it is used as a residence, for example a house or a flat. The ‘dwelling’ also includes the property's gardens or grounds. However, properties such as hotels, guest houses, boarding school accommodation and student halls of residence fall outside the definition of a ‘dwelling’, and thus outside the scope of the tax.
Valuing the property
The tax only applies to dwellings with a value of at least £500,000. The amount of the charge depends on the value of the dwelling. Therefore, it is necessary to know the value of any residential property owned wholly or partly by a company (or a partnership with at least one corporate partner). The key date is the valuation date. From 1 April 2018 the valuation date is 1 April 2017. If the property was acquired after 1 April 2017, the value is the date of acquisition.
The valuation is an open market valuation. How much is the charge? The charge is an annual charge payable for the period from 1 April to the following 31 March. The chargeable amount for 1 April 2019 to 31 March 2020 is shown in the following table.
Property value Annual charge
More than £500,000 up to £1 million £3,650
More than £1 million up to £2 million £7,400
More than £2 million up to £5 million £24,800
More than £5 million up to £10 million £57,900
More than £10 million up to £20 million £116,100
More than £20 million £232,350
Payment and returns
An ATED return must be filed by 30 April each year. The return should be filed using HMRC’s ATED online service. An agent can be appointed to file the return on the company’s behalf. The tax must also be paid by 30 April.
Partner note: FA 2013, Pt. 3 (ss. 94—174, Sch. 33 – 35).