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Tax Update Bulletin Pt 2 – April 20071. VAT Fuel Scale Changes From 1 May 2007, fuel scale charges for business cars used for private purposes, are to be based on the carbon emissions, apart from old cars where there is no carbon emission figure, where the engine capacity alone will be used. This is a change in the basis and is in line with a number of “green” measures, which the government has been introducing recently. It is to be used for VAT accounting periods beginning on or after 1 May 2007, so for example, if you have a VAT quarter ended 30 June 2007, you would not use the new figures until 1 July 2007. 2. Small Ex Gratia Payments It has been possible under an HMRC Statement of Practice to have these up to certain limits, paid tax free if certain qualifications are present, in relation to ex-employees. In February 2007 HMRC withdrew this Statement of Practice but with effect from 6 April 2006, which effectively does not now make these payments tax free. 3. Employee Tax Codes From April 2007 these codes will change automatically when updated P11D information is received and therefore there should be more regular changes once these forms are submitted to HMRC. In more recent months there has been much more movement on these codes, principally as a consequence of the processing of the tax returns to 5 April 2006 and also due to the practice of the HMRC trying to code out and collect tax at an earlier date, on an optional basis, which has led to the changes of many codes to avoid this. Therefore be prepared for continued tax code changes in the future. 4. HMRC New Executive Chairman HMRC have appointed a new executive chairman with effect from the end of February 2007 – Paul Grey, who has been an economist with the Treasury since 1969 and has also been in the DSS and the DWP. We wait to see what his influence over the policy making decisions of the Treasury will be. 5. Non Active Loss Making Partners Where partners in business work less than 10 hours a week, they are regarded as non active by HMRC. Any trading losses made have been permitted to be set off against the partners other income, subject to the amount of capital in the partnership. The Budget and recent proposed legislation is going to maximise the loss claimed in this way to £25,000 per annum, or the loss if lower, apart from Lloyds Underwriting Losses. It is also proposed that where capital is paid into the partnership after 2 March 2007, in order to increase the availability of losses up to that increased capital amount, that this relief will no longer be available where this has been done to get access to those tax losses. 6. Revenue Repayment Centralisation Due to the reorganisation of Revenue offices there has been a centralisation of the repayment claims work and this is now all being dealt with by the Leicester and Northants (Claims) District, so any repayment claims should be sent there if at all possible. 7. VAT and Cash Accounting One of the regulations which has been amended as a result of the Budget and came into force on 1 April 2007, is an effective doubling of the cash accounting limit for entry into the VAT cash accounting scheme, from £660,000 to £1.35 million per annum. Similarly the maximum turnover limit for those already operating the scheme, but above which they would then have had to leave the scheme, has been increased from £825,000 to £1.6 million per annum. 8. Beneficial Loan Interest The rate of interest which is charged on beneficial loans received by directors and employees from company employers, has now been increased with effect from 6 April 2007 to 6.25% per annum. It has been at 5% per annum for some years. This affects the taxable benefit from that date, arising on such loans. 9. Board and Lodging Agreements Following the withdrawal in April 2006 of the agreed taxable adjustments for owners of hotels and guest houses in particular, attributed to non business expenditure, known as board and lodgings and the subsequent temporary reinstatement of this following professional consultation with HMRC, the current thinking is that there will now be a series of locally set agreements, being established on a more permanent basis. This provides a known and easy method of accounting for non business expenditure in these instances and is to be welcomed. 10. Charities and Change of use Charities that have obtained zero rating for new buildings or construction services under an Extra Statutory Concession were previously liable for any VAT charge when there was a change of use of that building within 10 years to non charitable. This Extra Statutory Concession has now been altered, so that HMRC will now not enforce this reverse charge on change of use if this was not anticipated at the time that the zero rating was originally obtained under the Extra Statutory Concession. This is a welcome change for charities. |
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