The Fizz! Blog

Fuel-only mileage rates change tomorrow

Taxman-approved fuel-only mileage rates change tomorrow (in fact, the diesel ones are changing - the petrol ones haven't changed).  These are the rates that HMRC are happy for employers to use a) to reimburse staff for fuel used for company business that they've paid for and put in company cars, or b) reclaim from staff the cost of company fuel they've used for their own private motoring.  But they're also the rates that businesses can use to reclaim VAT on some of the mileage allowances paid to employees and directors.

Employers can pay a mileage allowance of up to 45p a mile, tax-free, when employees use their own car for business.  That hasn't changed, it remains 45p.

You can’t reclaim VAT on all of the 45p, 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 45p 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

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

Taxman-approved fuel-only mileage rates changed today.  These are the rates that HMRC are happy for employers to use a) to reimburse staff for fuel used for company business that they've paid for and put in company cars, or b) reclaim from staff the cost of company fuel they've used for their own private motoring.  But they're also the rates that businesses can use to reclaim VAT on some of the mileage allowances paid to employees and directors.

Employers can pay a mileage allowance of up to 45p a mile, tax-free, when employees use their own car for business.  That hasn't changed, it remains 45p.

You can’t reclaim VAT on all of the 45p, 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 45p 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 September.  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

Taxman-approved fuel-only mileage rates changed on 1 December.  These are the rates that HMRC are happy for employers to use a) to reimburse staff for fuel used for company business that they've paid for and put in company cars, or b) reclaim from staff the cost of company fuel they've used for their own private motoring.  But they're also the rates that businesses can use to reclaim VAT on some of the mileage allowances paid to employees and directors.

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.  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

Company car or not? Be careful

The rules on company cars, broadly speaking, are pretty clear.  If a company provides an employee or director with the use of car, the employee or director has to pay some personal tax, the amount being based upon the list price of the car and the cleanliness or otherwise of its emissions.  If the company pays for the employee or director's private fuel, there's more tax to pay. 

Sometimes you come across arrangements where a director has found that his company can lease a car for a lower monthly rate than he can - lease companies generally charge less for a commerical lease than a personal one.  However, the director doesn't want a company car- he just wants to take advantage of the lower monthly rate - so he gets his company to lease the car he wants, then reimburses the company for the monthly payments.  So he has the car, he's met the cost himself, and the company isn't out of pocket by a penny.

Unfortunately, there's always the risk that HMRC will take a dim view of this arrangement, and apply the strict letter of the law, which say that the company car rules kick in if a car is "made available" to a director by a company.  A recent case confirmed that, if HMRC take this approach, they will win.  In the case of A Whitby v HMRC a group of directors had got their company to lease cars on their behalf, and had then reimbursed the company for every penny of the lease costs.  The tax tribunal found that, despite the reimbursement, personal tax was due on a company car benefit.   The cars were leased in the name of the company, and hence the company was "making them available" to the directors.

To make things worse, they'd been claiming 40p a mile in mileage payments from the company to cover their motoring costs.  That's only available when it's your own car, not a company car, so they had extra tax and NI to pay there as well.

What the directors had done was entirely fair to any reasonable person.  But tax isn't always based on fairness.   They fell foul of the letter of the law and paid a heavy penalty as a result.

Lots of people have these arrangements.  If you're one, review them.

www.fizzhq.com

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

www.fizzhq.com

£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.

www.fizzhq.com

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