Member Since: 22nd Jan 2007
31st May 2007
Two separate requirements
Following the last point, I also think that getting a company van purely for commuting WILL lead to the £3k BIK.
The point is that there are two SEPARATE requirements contained in s.155(4) ITEPA 2003 and BOTH need to be satisfied in order to avoid the BIK.
(a) The commuter use requirement - this basically states that the van must not be available for private use other than ordinary commuting.
(b) The business travel requirement - this states that the van must be available mainly for use for the employee’s business travel.
On the facts given by Van Driving FD, condition (a) will be satisfied but not condition (b) since the van will be available mainly for commuting, not mainly for business travel.
The fact that commuting is (in a manner of speaking) exempted from counting as private use for the purposes of requirement (a) doesn’t make it into business travel for the purposes of requirement (b).
12th Apr 2007
I assume you mean 31 August 2006.
As a starting point. I think the statutory references you want are:
Tax Credits (Claims and Notifications) Regulations 2002:
• Reg 11(3) - for the 31 August deadline
• Reg 7 - for the 3 month backdating limit
There are some instances in which Tax Credits for disabled people can be backdated by more than 3 months: See TCTM06104.
The overcomplexity and impracticality of the Tax Credits system is unfortunately legendary. Good luck with this.
2nd Mar 2007
Just to answer Michael B’s third paragraph: The approved mileage allowance payments apply to vans as well as cars.
The 10,000 miles limit is the total mileage travelled IN ALL VEHICLES in relation to the employment during the tax year. It is not 10,000 miles per vehicle. See s.230(3) ITEPA 2003.
30th Jan 2007
MAR seems to be different
That may be the rule for "normal" travel expenses - however, my point was that, when I looked at the legislation, I noticed that mileage allowance relief was treated slightly differently.
See also s.359 ITEPA 2003.
29th Jan 2007
If it is his own car then the question is whether the director can claim Mileage Allowance Relief (i.e. the AMAPs not reimbursed). The potential problem is that he has no earnings from that employment. s.329 and s.328 ITEPA 2003 state the general rules for expenses, which are basically (1) that the amount of a deduction cannot exceed the earnings from which they are deductible (i.e. they cannot create an “employment loss”) and (2) deductions from one employment cannot be offset against earnings from another employment.
However, these sections apply to Part 5 of ITEPA and MAR is governed by s.231 and s.232, which fall within Part 4 of ITEPA. MAR is therefore dealt with slightly differently from other travel expenses.
There doesn’t seem to be anything in s. 232, or the surrounding sections, which states that MAR has to be specific to any one employment – indeed it says “if ANY of the employee’s earnings are taxable earnings in the tax year in which the employee receives them ….the relief is allowed as a deduction from those earnings.”
Surprising, perhaps, but that’s what the legislation says.
Unless anyone can see a flaw in this analysis, it would seem possible to offset MAR from the “salary – less” employment against the earnings from the other, salaried, employment.
Obviously it is possible that HMRC might initially query it, and you also have to get your tax return software to co – operate!
29th Jan 2007
Private or company car?
Does the director own the car in which he does this travelling personally, or is it a company car?
26th Jan 2007
A lack of PAYE tax deductions does not in itself prove that a person is self- employed. HMRC may use an NT code, for example, where a person self – assesses on trading or other non – PAYE income and holds a PAYE post as a small part of their main work. (See www.hmrc.gov.uk/manuals/pommanual/pomcod/pomcod02102.htm.)
However, there seems to be a fairly good chance that your client is indeed self – employed. HMRC manuals ESM 4121 explains that actors/performers who carry out a series of short term assignments are normally self- employed under normal employment status indicators. For example, they are normally independent, on a long term approach, from a particular regular paymaster.
The manual also explains that the worker’s contract may include favourable terms such as holiday pay which have been negotiated by the performers’ unions and that this may, slightly misleadingly, give the impression of employment. This explains your view of the sample contract.
As employment status is a complex area, you obviously need to read the above extract and check everything carefully.
The NIC position would need to be considered separately.
Finally a pedantic point: the terms Schedule D (for individuals) and Schedule E have now been abolished – such income can be referred to now simply as trading income and employment income respectively.
Hope this helps
24th Jan 2007
You may be thinking of the increase, from 2006/07, in the “income disregard” for WTC/CTC from £2,500 to £25k.
Firstly, as background: Tax credit (“TC”) claimants have always been potentially able to enjoy a very high rate of “tax relief” because TC’s are (at lower income levels) “tapered” at 37%: i.e., if the claimant’s income goes down by £X, then their TC award potentially increases by 37% x £X.
So for a self – employed TC claimant paying BR tax at 22% and NI at 8%, the effective rate of “tax relief”on expenses is 22% + 8% + 37% = 67%.
67% is a very high rate in any case, but the situation was compounded when the “income disregard” increased to £25k. This basically means that a TC claimant’s income can increase by up to £25k from one tax year to the next without their income being adjusted for TC purposes.
This clearly creates an incentive for TC claimants to arrange for their income to be low one year, and high the next. Consider a trader with steady annual profits of £30k who in 2006/07 purchases, for £15k, a low emissions car qualifying for 100% capital allowances. Their income for 2006/07 is £15k and for 2007/08 it is £30k. However, because the increase in income < £25k, their TC award for 2007/08 is based on £15k not £30k.
The 37% increase in TCs is effectively given in 2006/07 AND 2007/08 and the effective rate of tax relief is 22% + 8% + 37% + 37% = 104%!
This imbalance in annual profits could also potentially be attained by purchasing a large item of equipment qualifying for first year allowances and then disclaiming capital allowances in the second year, or by paying pension contributions in alternate years.
It should be noted that there is a TC “anti – avoidance” rule which states that “If a claimant has deprived himself of income for the purpose of securing entitlement to, or increasing the amount of, a tax credit, he is treated as having that income”. However, HMRC might struggle to successfully apply this to an entirely normal business transaction such as the purchase of a car.
Simply purchasing a car for business use, even to make use of the income disregard, does not seem unethical, although more artificial means of shifting income between years might be seen as such.