There are a number of situations where care should be taken in the way in which claims are made for the business use of a vehicle, usually a car, which is also used for private purposes.

 We have listed below a number of issues that business owners and private car users should be aware.

1. If you are self-employed and your business assets include a car you should be reducing your claim for capital allowances, loan and HP interest and running costs based on your private use of the vehicle. The percentage added back should be based on a record of your private and total mileage. On enquiry, HMRC are unlikely to accept a private or business use percentage unless it is backed up by a detailed mileage log.
2. Alternatively, if you are self-employed, and if your business turnover does not exceed the VAT registration threshold (currently £81,000) you can use the fixed mileage rates referred to below. These do not cover loan interest and this can also be claimed subject to restriction for private use based on private and total mileage for the period claimed.
3. If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allows you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter) and the number of miles you claim. The 45p/25p rates are the maximum claim HMRC will allow. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.
4. If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Usually, the cost of any such reimbursement will be lower than the tax charge created by the benefit-in-kind assessment. The reimbursement can be calculated using the ‘advisory fuel rates’ on HMRC’s website and you will need to log your private mileage.
5. If your company provides you with a company car, and if you use the vehicle for business and private purposes, then you will be taxed on the deemed benefit. The amount of the benefit-in-kind charge will depend on the CO2 emissions of the vehicle you use. The rates of benefit vary between 0% and 35% of the list price of the vehicle when new. If you presently drive a car with a high CO2 rating you may want to consider trading it in for a lower CO2 rated model. 

 You will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:

• Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.
• The business miles claimed should not be rounded.
• Home to work mileage should be excluded.

The government is consulting on plans to introduce a new strict liability criminal offence for individuals who hide their money offshore. Under the plans announced by the Chancellor, HM Revenue & Customs (HMRC) would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for a criminal conviction to be handed down.

At present, HMRC has to demonstrate that even when someone failed to declare offshore income that the individual intended to evade tax. This change will mean HMRC only has to demonstrate the income was taxable and undeclared meaning it will be easier to secure successful prosecutions of offshore tax evaders.

As well as introducing the new criminal offence, the government will consult on a range of options building on the existing penalties faced by those hiding their money in offshore accounts – currently up to 200 percent of the tax owed – to make sure they act as a clear and effective deterrent.

The consultation will look at whether the existing penalty limit should be raised further, how penalties could be increased if individuals try to move money around in a bid to avoid detection and extending the penalty regime to include inheritance tax. It will also publicise that HMRC is ready and able to financially reward whistleblowers for significant information that helps uncover offshore hidden untaxed assets.

Chancellor of the Exchequer, George Osborne, said:

“The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing.

But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.”

Figures recently published by the Office for National Statistics show that unemployment has dropped below 7% for the first time since the recession and employment has seen the biggest annual jump in a generation.

Unemployment fell by 77,000 in the last 3 months, taking the unemployment rate to 6.9% for the first time since 2009.

In the largest annual rise in nearly 25 years, the number of people of people in a job rose by 691,000 – more than double the population of Newcastle – bringing the record number of people in work to 30.39 million.

Wages also rose on the year by 1.7%, against yesterday’s announcement that March’s inflation had dropped to 1.6%, and job vacancies rose again, up 108,000 over the past year bringing the number of vacancies in the UK economy to 611,000. The 1.7% increase in wages includes bonus payments, without bonuses the rate of increase is 1.4%, still below the rate of inflation.

Minister for Employment Esther McVey said:

More young people are in work, more women are in work, wages are going up, and more and more businesses are hiring – and it’s a credit to them that Britain is working again.

But there is still more to do – which is why I’d go even further and call on more employers to work with us to tap into the talent pool the UK offers.

The number of people in work has increased by 1.5 million since 2010 – over a million of these jobs are full-time – and the employment rate is now 72.6%, showing the government’s long-term economic plan to back enterprise and businesses so they can create jobs is working.

The proportion of women in work also hit a new record of 67.6% – the highest since records began.

Long-term unemployment is down 93,000 on the year, which is the largest annual fall since 1998. The number of unemployed young people also fell, by 38,000 over the last 3 months, and has been falling now for the last 7 months.

The government announced recently that people who have recently taken a tax-free lump sum from their defined contribution pension will be given 18 months rather than 6 months to decide what they wish to do with the rest of their retirement savings, and will not be put at a disadvantage should they wish to wait to access their pension savings more flexibly.

This follows an earlier announcement confirming that the government would take action to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required to make a decision regarding their pension, either by buying an annuity or entering into capped drawdown.

Currently, if this is not done, the lump sum is then taxed at 55%. This extra time will allow people to make the right decision for their pension.

Exchequer Secretary to the Treasury, David Gauke, said:

“At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly.

However, we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the budget.”

At present, it is possible to make an election, in certain circumstances, allowing owners of more than one residential property to choose which property is their main residence. In this way a measure of Private Residence Relief (PRR) can be achieved for the elected property. This process of swapping properties for tax purposes achieved notoriety during the MPs’ expenses scandal when certain MPs were found to have “flipped” between properties in London and their constituency to achieve capital gains tax advantages when they sold.

HMRC have recently published a consultation document entitled “Implementing a capital gains tax charge on non-residents”. Surprisingly, section 3 of the document proposes that the present PRR election is to be scrapped for UK home owners and replaced by less advantageous rules. Here’s what the report says:

“The government is considering two possible approaches, both of which involve changes to the process by which a person can benefit from PRR. The government may:

1. Remove the ability for a person to elect which residence is their main residence for PRR. This would mean that PRR would be limited to that property that is demonstrably the person’s main residence. The government envisages that this would build on the existing process that applies where an individual with two or more residences has not made an election. In these cases, the person’s main residence is determined by the balance of all the evidence including factors such as the address where the taxpayer’s spouse or family lives, mail is sent, and that is on the electoral roll.
2. Replace the ability to elect with a fixed rule that identifies a person’s main residence e.g. that in which the person has been present the most for any given tax year. Depending on the test that is devised this may mean that taxpayers have to keep different or additional records.”

It is likely that any changes to legislation will be effective from April 2015. This does give owners of more than one property a chance to consider their options in the interim period. Please contact us if you would like an update on the present capital gains tax opportunities.