REPORT EMPLOYEE BENEFITS ON FORM P11D BY 6 JULY

P11D forms for reporting expenses and benefits in kind provided to employees and directors in 2021/22 need to be submitted by 6 July 2022.

Remember that reimbursed expenses no longer need to be reported where they are incurred ‘wholly, exclusively and necessarily’ in the performance of the employee's duties. HMRC do however expect internal controls to be in place to ensure that the reimbursed expenses qualify under these terms.

Note also that non-cash ‘trivial benefits’ that cost no more than £50 do not usually need to be reported. This typically covers non-cash gifts to employees at Christmas and on their birthdays.

IS YOUR BUSINESS ENTITLED TO THE EMPLOYMENT ALLOWANCE?

The Employment Allowance (EA) is a £5,000 allowance set against employer National Insurance Contributions (NICs) and has to be claimed each tax year by qualifying employers. The EA was increased from £4,000 to £5,000 this tax year to help to soften the blow of the 1.25% increase in employer contributions, now calculated at 15.05%.

• If two or more companies or charities are connected with one another, then only one of them may claim the EA.  
• Employers are not eligible to claim the EA where their employers’ Class 1 National Insurance liabilities in the previous tax year exceeded £100,000.
• Another important exclusion from the EA are single director companies where the director is the sole employee of the company.

BUYING AN ELECTRIC CAR? DOES IT NEED TO BE NEW?

The shortage of semiconductors has meant long delays in the delivery of new cars. This has caused many company car drivers to choose a second-hand car instead, but what are the tax consequences?

Unless the car has zero emissions, the capital allowance rules are the same for new and used cars bought by the business. Plant and machinery capital allowances may be claimed on the purchase price of the car at either 18% or 6%, depending on whether the CO2 emissions for the vehicle are below or above 50g CO2 per km.

Where a zero-emission car is acquired by the business, a special 100% first year allowance only applies to new cars. There is however an exception for certain ex-demonstrator cars. HMRC accept a car is unused and not second hand provided it has been driven for a limited number of miles for the purposes of testing, delivery, and test driven by potential purchasers.

When calculating the P11D benefit of company cars the original list price inclusive of extras should be used, not the purchase price. Hence the P11D value for a secondhand company car may be significantly higher than the price paid for the vehicle.

CAPITAL GAINS TAX ON SEPARATION AND DIVORCE

When a married couple or civil partners separate, tax planning is understandably not at the top of the list of their thoughts. However, a ‘no gain/no loss’ rule allows capital assets to be transferred between them free of capital gains tax (CGT) up to the end of the tax year in which they permanently separate. Beyond that date, asset transfers between the couple will often give rise to a CGT liability. With many divorce settlements taking several months this is worth careful consideration.

The Office of Tax Simplification has recommended to the Treasury that the no gain/no loss rule should be extended to two years from the date of permanent separation. The government have accepted this recommendation, but the change in rules is yet to be legislated.

The actual date that assets are treated as transferred between the separating couple depends upon how the marriage or civil partnership is dissolved.

It is also important to consider private residence relief (PRR) on the family home. It should be noted that where one spouse or civil partner leaves the matrimonial home, they may continue to be eligible for PRR even if they no longer live in the property. There are specific conditions that need to be satisfied for this to apply.

All in all, CGT on separation is a complex area and please do talk to us if any issues may be in point. We understand the sensitivity of the situation and are here to help.

ADVISORY FUEL RATE FOR COMPANY CARS

Unbelievably there were very few changes to the HMRC advisory fuel rates from 1 March 2022, which may not have been your experience at the filling station!

Now that the increased prices have fed through into the HMRC calculations there are some significant increases from 1 June 2022, as set out in the table below.

In cases where the employee pays for the car fuel, these mileage rates should be used by the employer to reimburse the employee for business journeys.

In cases where the employer pays for the car fuel, these mileage rates should be used by the employee to reimburse the employer for private mileage, if they want to avoid a fuel benefit in kind arising.

Where there has been a change, the previous rate is shown in brackets. The previous rate can continue to be used until 30 June 2022, if so desired.

Note that for hybrid cars the appropriate petrol or diesel rate should be used.

PREPARE YOUR PAYROLL FOR THE NATIONAL INSURANCE CHANGES IN JULY 2022

From 6 July 2022, some National Insurance Contributions (NICs) thresholds will increase. The primary threshold for 6 July 2022 to 5 April 2023 will rise to:

●          £242 per week

●          £1,048 per month

●          £12,570 per year

See Class 1 National Insurance thresholds for 2022 to 2023

To accommodate this change, payroll software, including HMRC's Basic PAYE Tools, will need to be updated. This may happen automatically, or you might need to take action.

It is important that payments due to be made on 6 July 2022 or later are calculated using the correct thresholds. Employers who run their payroll early should check that their software has been updated before processing and reporting these payments.

HMRC expect that all software will be updated by 6 July 2022, so any payments processed after that date should not need to be delayed. If you are unsure about whether or not your software has been updated, please contact your software provider.

If you use Basic PAYE Tools, please note that this software will be updated to take account of National Insurance threshold increases from 4 July 2022. HMRC advise you to wait until after 4 July 2022 to run payroll for any payments made on or after 6 July 2022.

Please talk to us about these changes and how we can help you with your payroll.

See: Rates and thresholds for employers 2022 to 2023 - GOV.UK (www.gov.uk)

CHANCELLOR ANNOUNCES £15BN HELP WITH ENERGY BILLS

On 26 May the Chancellor announced a package of measures to help households dealing with domestic energy bills paid for by a new Energy Profits Levy (Windfall Tax) on the profits of oil and gas companies.

Many were suggesting that the chancellor would also remove the current 5% VAT rate on domestic fuel but that that was not announced. Maybe he is keeping that one up his sleeve for the Autumn Budget. There has also been a suggestion that he might cut the general rate of VAT to stimulate the economy and at the same time reduce inflation.

THE MOVE FROM CHIEF TO CUSTOMS DECLARATION SERVICE (CDS) – IMPORTERS AND EXPORTERS

HMRC is closing the Customs Handling of Import and Export Freight (CHIEF) system for both imports (Sep 2022) and exports (March 2023) and is encouraging all businesses to move to CDS. You can find information for you and your importers below.

Declarant Checklist – Moving to the Customs Declaration Service: Declarant checklist – moving to the Customs Declaration Service - GOV.UK (www.gov.uk)

Trader Checklist – Moving to the Customs Declaration Service: Trader checklist – moving to the Customs Declaration Service - GOV.UK (www.gov.uk)

DIARY OF MAIN TAX EVENTS – JUNE/JULY 2022

Please contact a member of our team if you would like to discuss any of the issues raised.
 

Dawn, James, Mark, Deb, Penn, Lucy and Becky