The Fizz! Blog

Fuel costs rising

No doubt you’ll have noticed that petrol and diesel costs have increased recently.  The taxman has noticed too, and increased some VAT and tax allowances for fuel costs, albeit not by a great deal.

Employers can pay a mileage allowance of up to 40p a mile, tax-free, when employees use their own car for business.  That hasn't changed, it remains 40p.

You can’t reclaim VAT on all of the 40p, but you can reclaim VAT on the part that represents fuel, as long as you retain VAT receipts covering the cost.  As fuel costs have increased so sharply, the approved rates - the part of the 40p that the taxman is happy to accept as representing the cost of fuel - have just been increased once more.  The new list of rates is here:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

The new rates are to be applied from 1 December.

The rates can also be used where someone has a company car but is required to pay for the fuel they use privately.  Either:

• The employer can pay for all the fuel, then the employee can work out their personal mileage and reimburse the employer at the approved rates, or

• The employee can pay for all the fuel, then they can work out their business (not commuting) mileage and the employer can reimburse them for it at the approved rates.

So, not an exciting change, but every little helps - and if you're running a fleet of vehicles it may represent a meaningful saving.

And if you're VAT registered, not on the flat-rate scheme, and failing to reclaim VAT on your mileage costs at all, you should start!  You can even reclaim some of the VAT you've missed out on in the past - get in touch with us to find out how.

www.fizzhq.com

Fuel-only mileage rates change

As of 1 July, the Revenue have updated their fuel-only mileage rates. These can be used a) for reclaiming VAT on that part of the 40p a mile mileage allowance that represents fuel and b) reimbursing employees for business fuel costs where the employee buys all the fuel but it's a company car. To be honest, I'm not sure why they've bothered, because the rates aren't very different from the old ones - in fact some of them, including the rates for petrol cars up to 2 litres - which I'm guessing is the most common category - have stayed the same.  In any case, the new rates are here:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

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£2,000 to scrap your old car

That was one of the proposals in last week's budget, and it’s absurd.  If your car is over 10 years old, you can accept £2,000 (half of it donated by the government) to scrap it in the next year, as long as you buy a new one.  It doesn’t matter if you’re scrapping a small, fuel-efficient car in order to buy a Porsche or a Range Rover, that’s fine.  The taxpayer (i.e. you and me) will contribute.  It also doesn’t matter if the car is made overseas, and no British manufacturer or worker (apart from the car salesman) will see any of the £2,000, that’s OK as well, you’ll still get £2,000 towards your purchase.  So, against a background of concern over a) over climate change and sustainability and b) the prospects for British manufacturing and employment, we’re going to pay for the scrapping of perfectly good cars, purely because they’re more than 10 years old, and the manufacture of new cars that don’t even need to exist, where no British manufacturer or worker is going to benefit in any case.  It’s a completely incoherent initiative that doesn’t make sense from any angle.

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Minimising your motoring costs

Needless to say, one of the most common concerns for clients at present is the rising cost of motoring, and ways in which they might be able to minimise the burden.  So, here are a few ideas about areas you could look at.

Claim back VAT on mileage
VAT-registered businesses can reclaim VAT on the mileage allowances paid to employees - I've written about this before.  Make sure that you're doing it!  Many, many businesses are not reclaiming VAT that they are entitled to.

Are you recording all your business miles?
If you're running a company, you will be (or should be) claiming mileage from your company at the maximum tax-free rates of 40p a mile for the first 10,000 miles and 25p a mile thereafter.  Make sure you record all your journeys!  This might seem obvious, but sometimes it doesn't get picked up.

If you're self-employed, you may be using the alternative system of totalling all of your motoring costs and claiming tax relief for the part that relates to business miles.  So ensure that the estimate of business miles is right - you may not have checked this for some years, and if the proportion of your mileage that's business-relates has increased over that time, you can increase your claim.

Take your car out of your company
When you purchased your car, it may have been optimal to have it owned by your company and pay personal tax on the benefit each year.  But is that still the best way forward?  If it's no longer the best system, you may be able to take the car out of the company and be financially better off as a result.

Are you paid mileage allowance of less than 40p a mile?
If so, you can get tax relief on the shortfall, via your tax return if you submit one, or via a letter to the taxman if you do not.

Swap your company car for a classic car!
Taxable benefits are based upon the original list price of the vehicle, so a classic car with a low (in today's terms) list price leads to a relatively small tax bill.  Of course, the maintenance costs are likely to absorb the saving, but if you were thinking of buying a classic car anyway, it's one of the few occasions when a company car is generally the way to go!

If you want to discuss any of these ideas, give us a call!

www.fizzhq.com

Car-derived vans

A pretty obscure subject and of limited interest to most people!  But, for the few people who may be interested:

If a VAT-registered business buys a car, it can't reclaim the VAT on it (in 99.99% of cases).  When it buys a van, it can.  Therefore if there's a dispute over whether a vehicle is a car or a van, the taxpayer will argue van and the taxman will argue car.

A car-derived van is, as you'd think, a van based on a car - no rear seats, no back windows etc.  Whether the taxman considers it a car or a van depends upon the exact design.  Helpfully, they have published a list of such vehicles here:

http://tinyurl.com/59h58o

Hopefully this is of use to someone!

www.fizzhq.com

Approved fuel-only mileage rates rise

As is well known, employers can pay employees 40p a mile for business mileage done in the employees own car. However, the Revenue publish a list of fuel-only mileage rates. These can be used a) for reclaiming VAT on that part of the 40p that represents fuel and b) reimbursing employees for business fuel costs where the employee buys all the fuel but it's a company car. Because of the recent increases in the cost of fuel, the Revenue have increased the rates they're happy with. The new rates, effective from 1st June, are here:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

www.fizzhq.com