View the related Tax Guidance about Scale charges
Cost to provider and moneyâs worth
Cost to provider and moneyâs worthMethods of valuing benefitsThere are broadly three methods that apply to the calculation of the value of benefits. These should be considered in order as follows:â˘items that are not cash but have direct monetary value to the employee or are capable of being easily turned into cash by the employee are valued using the âmoneyâs worthâ methodâ˘specific rules such as scale charges or set methods of calculation in the legislation are used for a range of benefits and expensesâ˘for any benefit not covered by the above rules, the âcost to the employerâ method is used as part of the residual liability provisionsNote that although the âmoneyâs worthâ method is considered before the âcost to the employerâ method, where the âcost to employerâ method gives a higher value, that is the value used for the benefit for PAYE purposes. In practical terms, this is unlikely to come up as it would be most likely to apply to an asset provided to the employee and there are specific rules for assets â see the Assets â bought, sold or given guidance note.Making goodRegardless of the method used for calculating the value of the benefit, any amount the employee pays towards that benefit is deducted from the taxable value and only the balance is taxable and subject to NIC. This reduction in the benefit value applies only where the employee makes good this amount before 6 July following the end of the tax year
Weekly tax highlights â 18 December 2023
Weekly tax highlights â 18 December 2023Direct taxesMajor Sporting Events (Income Tax Exemption) (World Athletics Indoor Championships Glasgow 24) Regulations, SI 2023/1381The Regulations introduce a UK income tax exemption for non-UK residents, for income arising from activities performed in relation to the Glasgow World Athletics Championships between 23 February and 4 March 2024 inclusive.As usual with the major sporting events tax reliefs, individuals must be accredited in relation to the games (eg competitors, officials or contractors) in order to benefit from the exemption.CIOT questions HMRCâs approach to R&D claimsThe CIOT has written again to question HMRCâs volume compliance approach to processing claims for R&D tax relief, after having raised a number of concerns earlier in the year.Legitimate R&D claims are still being rejected, says the CIOT, and âthe underlying policy objectives of R&D tax relief, to encourage investment in innovation and economic growth, continue to be undermined as businesses are put off claiming relief to which they are entitledâ.The CIOT raises several key issues:â˘the use of HMRCâs power to correct corporation tax returns (in FA 1998, Sch 18, para 16) to remove R&D claims appears to be a broadening of the understood scope of that power which is to correct âobvious errorsââ˘HMRCâs debt management team had in some cases been engaged early on in the process and before potential appeal options had been exhausted. HMRC has confirmed that this resulted from systems errors which have since been corrected, and agreed that debt management should not be involved
Input tax â motoring expenses
Input tax â motoring expensesThis guidance note looks at the rules for recovering VAT on motoring expenses. In particular, it looks at VAT recovery on fuel and the charging of electric vehicles. It also considers VAT recovery for other motoring-related expenditure.The recovery of VAT on the purchase or lease of a car or other vehicle is covered separately in the Input tax â buying and leasing cars and other vehicles guidance note.For an overview of input tax more broadly, see the Input tax â overview guidance note.For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.436 and V3.433.VAT recovery on road fuelVAT is generally recoverable on fuel which is used for taxable business purposes. However, there are intrinsic difficulties in proving road fuel is really used for business purposes. As a result, there are four broad options for a businesses which pays for road fuel:â˘treat all of the VAT as input tax because 100% is used for business purposes (this will only be possible for cars such as pool cars which are used exclusively for business purposes)â˘treat all of the VAT as input tax and either apply the âfuel scale chargeâ or account for VAT on the value of âprivate useââ˘use detailed mileage records to separate business mileage from private mileageâ˘decide to treat no VAT incurred as input taxNotice 700/64, para 9.1; VIT55400If an employee is charged for the fuel used privately, then the business will
Guide to completing a UK VAT return
Guide to completing a UK VAT returnThis guidance note provides information on the contents of a UK VAT return. Information on completing a VAT return for businesses using the flat rate scheme is included in the Flat rate scheme (FRS) â operating the scheme guidance note.Box 1: VAT due on sales and other outputsThis is the total amount of VAT charged on goods and services in the return period. Businesses should ensure they include VAT payable to HMRC for certain supplies which may be made outside their core business such as:â˘VAT due in the period on imports accounted for through postponed accounting (see the Imports â postponed accounting for import VAT guidance note)â˘VAT on the fuel scale charge (see the Input tax â Motoring expenses guidance note)â˘the sale of stocks and assetsâ˘VAT on goods taken out of the business for private useâ˘VAT due under the reverse chargeâ˘supplies to staffâ˘output VAT on gifts of goods (see the Supply and Consideration â business gifts and samples (deemed supply) guidance note)â˘commission received from selling something on behalf of someone else (agentâs commission)â˘VAT shown on self-billed invoices issued by the customer (see the Self-billing guidance note)Notice 700/12, para 3.2Other noteworthy points when completing box 1 include:â˘VAT on credit notes should be deductedâ˘VAT on the full value of part-exchange goods should be includedâ˘assessments made by HMRC should be left outNotice 700/12, para 3.2Box 2: VAT due in the period on acquisitions of
Own car or company car
Own car or company carThis guidance covers some ideas for tax planning for the provision of cars to owner-managers and their spouses / civil partners. Detailed rules regarding the taxation of company cars are covered in the Company cars guidance note in the Employment taxes module.For guidance on the VAT implications of purchasing or leasing a car through the company, see the Input tax â buying and leasing cars and other vehicles, Input tax â buying and leasing cars and other vehicles and Input tax â motoring expenses guidance notes in the VAT module.HMRC provides a company car and car fuel benefit calculator.If an owner-manager or director uses their own car for business purposes, then they can be reimbursed by the company without incurring tax liabilities, provided, payments are made within the limits prescribed by HMRC. Alternatively, if they use a company car, they would pay income tax on the benefit received based on the level of the carâs CO2 emissions and its list price. The employing company will also be liable to Class 1A NIC on the benefit.The company will usually pay for ownership or lease of the car and most of the ongoing associated costs. Provided that these costs are made wholly and exclusively for the purpose of paying the owner-manager, they will be allowable deductions for corporation tax purposes. The company receives corporation tax relief for depreciation of company cars in the form of capital allowances. There may also be an adjustment to the companyâs profits
Weekly tax highlights â 22 April 2024
Weekly tax highlights â 22 April 2024Direct taxesUpdated HMRC guidance: Ordinary commuting and private travel (490: Chapter 3)Section 3.39 has been added to the guidance to explain the rules around claiming tax relief for flexible and hybrid workers, and include an example.Tax credits threshold error correctedThe Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations, SI 2024/510 correct the income threshold for working tax credit to £7,955 rather than £7,995 as had inadvertently been set out in the original 2024 threshold uprating regulations (reg 4(3) of SI 2024/247).Indirect taxesVAT fuel scale charges updatedThe VAT road fuel scale charges, which have been updated for the period 1 May 2024 to 30 April 2025, are used to account for private fuel consumption in a business vehicle, essentially fixing on a flat-rate basis the proportion of VAT that relates to expenditure on fuel that is used for private purposes. When the UK was a member of the EU, it was given a special derogation which allowed the use of the scale charges. Although that no longer applies generally post-Brexit, given the special position of Northern Ireland in relation to EU VAT rules for supplies of goods, the derogation continues until at least 31 December 2026 in Northern Ireland (by virtue of Council Implementing Decision (EU) 2023/2907).HMRC Brief 4 (2024): Interpretation of VAT and excise law from 1 January 2024HMRC Brief 4 (2024): Interpretation of VAT and excise law from 1 January 2024 confirms that UK VAT and excise law continues to
Partial exemption â related issues
Partial exemption â related issuesThis guidance examines a number of important issues related to partial exemption.For an overview of partial exemption more broadly, see the Partial exemption â overview guidance note.For in-depth commentary on the legislation and case law, see De Voil Indirect Tax Service V3.460.Claiming late input VAT under partial exemptionIf a partially exempt business fails to recover input tax that it is entitled to in the correct VAT return period, then it can normally make a âbelatedâ claim for the input tax. There are time limits (or âcapping rulesâ) on making this sort of claim and input tax cannot be claimed more than four years after the due date for the VAT return it should have been included on. If the annual adjustment is not capped under the capping provisions, but earlier periods covered by the annual adjustment are affected, the business can use the annual adjustment to recalculate the amount of recoverable VAT for the longer period. However, if a business has made an error in an earlier period, it cannot use the annual adjustment to correct that error. The business must use the corrected figures when undertaking the annual adjustments; however, the VAT amount must not be adjusted. Please see the Annual adjustments (longer period adjustments) guidance note for more information. Belated claims (whether made via an error notification or any other means) must be based on the partial exemption method in place at the time the input tax was incurred. When making such a
AâZ of benefits in kind and expenses payments
AâZ of benefits in kind and expenses paymentsEstablishing correct treatment and method(s) by which tax and NIC are collectedThis note provides an alphabetical summary list of common payments or benefits which may be provided to employees. It summarises the PAYE treatment and links to our full guidance on that item, as well as HMRC manual pages.Navigation tip: press âCtrl + Fâ to search for a particular term within the table.Expense payment or benefitFurther detailsUsual tax / NIC treatmentReferencesAAccommodation: provision of living accommodationTaxed on annual value (or rental cost if higher), plus additional charge if cost over £75,000. But exempt if provided for proper performance of duties or for better performance where this is customaryP11D / Class 1ALiving accommodation; EIM11331, EIM11428Accommodation utilities: heating, lighting, council tax and water rates (for furniture, see Assets made available)Actual cost is normally taxable. Where accommodation itself is exempt, council tax and water rates are also exempt, and other taxable costs limited to 10% of employeeâs net earningsP11D / Class 1AUtilities, council tax and other bills in accommodation; EIM21720Assets made available (not cars or vans) without transferHigher of 20% of market value or rental cost taxable per year. Apportionment possible where part business useP11D / Class 1AAssets â made available to an employee; EIM21880Assets transferred to employeeUsually based on value when transferred, could be higher if previously used by an employeeP11D / Class 1AAssets â bought, sold or given; EIM21640BBank
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