HMRC fuel rates

From 1 July 2008 the Revenue have published new mileage rates that company car users can use to calculate the fuel cost of running their vehicles for private purposes. The new rates may be used from 1 June 2008. If this private element is repaid to employers the employees will avoid the penal car fuel benefit charge. The new rates are:

Engine size:

* 1400cc or less:           petrol 12p, diesel 13p, LPG 7p.
* 1401cc to 2000cc:      petrol 15p, diesel 13p, LPG 9p.
* Over 2000cc:               petrol 21p, diesel 17p, LPG 13p.

Employers can also use these rates to calculate the VAT input tax on fuel included in staff mileage claims – employers will need to retain fuel receipts from staff to prove the fuel was purchased. It is unlikely that staff will have receipts that exactly match the fuel element on their claim forms. Receipts should cover the same time period and be sufficient to cover the VAT claimed.

The rates for use of the employees vehicle for business mileage remain unchanged at

First 10,000 miles      40p per mile

thereafter                    25p per mile

These rates have remained unchanged for many years despite the dramatic fuel price rises, an increase is long overdue!

Companies House – the new regime

New Filing deadlines:

Companies with accounting periods beginning on or after the 6 April 2008 are subject to the following changes to the filing deadlines with Companies House.

1. Private companies and LLPs – the delivery deadline has been reduced by one month from 10 months to 9 months.
2. Public companies – the delivery deadline has been reduced by one month from 7 months to 6 months.

Consequential changes include:

* Full calendar months for filing periods have been introduced. Where the accounting period ends on a month end date the accounts filing period will end on a month end date. (Except for the first accounting period)

* Qualifying companies can still file abbreviated accounts.

Increased late filing penalties, private companies:
(Penalties for public companies are shown in brackets)

The penalties shown below apply to late filing of accounts on or after 1 February 2009.

* Not more than 1 month late, penalty £150 (£750)
* More than 1 month but not more than 3 months late, £375 (£1500)
* More than 3 months but not more than 6 months late, £750 (£3000)
* More than 6 months late, £1500 (£7500)

If a company fails to file on time for two successive years, the penalties are doubled in the second year.

The role of Company secretary

From 6 April 2008 private companies can choose whether they wish to have a company secretary or not.

If you decide to dispense with a company secretary’s appointment you will need to:

* Notify Companies House using the appropriate form.
* Amend the company’s articles of association. (Only necessary if the articles specifically require that company has a secretary.)

A company can now have a sole director and no company secretary, ie just one officer is required.

Please note that from 1 October 2008, if you do keep your company secretary, they will be able to file a service address for the public record.

Selling business property which has been rented

Many entrepreneurs have purchased commercial property that has been fully or partly occupied at various times by their business, and rent may have been charged for the use of the property; either the property owner has been paid rent by his business, or by other third parties.

The way in which the new capital gains tax rules apply to the disposal of these properties changed on 6 April 2008.

Under the new rules, all taxable capital gains are now subject to a flat 18% tax chargem with one important exception. If a disposal qualifies as the sale of a business asset you may be able to claim entrepreneurs’ relief. In which case, the first £1m of qualifying lifetime disposals are subject to tax at the reduced rate of 10%. Generally speaking the disposal of a business property should qualify for entrepreneurs’ relief as long as it is sold in conjunction with the sale or cessation of the business, or within 3 years of that date.

Obviously, if you have purchased a property for the purposes of running your business you may feel that this relief will be available to you when you sell the property. Unfortunately the position of certain property owners, particularly those who have charged rent to their business, may not be so straightforward.

The issues that affect the availability of entrepreneurs’ relief when commercial property has been rented to a business, are complex and if you have commercial property please feel free to speak to us for more details. However, we have highlighted below the fundamental difference between a disposal by a sole trader and a disposal by a partner or company shareholder.

1. Sole traders are treated differently to partners and owners of limited companies.

If you are a sole trader there would be no commercial or tax purpose in charging your business rent for the use of your property – both property and business are in your name. There could be circumstances where part of the property has been let to a third party. However as long as part of the property is in use by the owner’s business when the property is sold, a claim to entrepreneurs’ relief should be effective; at least to some extent.
2. Partnerships and limited companies.

If a partner or shareholder has purchased a property and made this available to the business for a rental payment, the CGT position on disposal is more complex. If rent has been charged by the owner to the partnership or company, a claim for entrepreneurs’ relief on sale may be precluded.

A final point. Relevant legislation has not yet completed its passage through Parliament. The Treasury are aware that a sale of a business property prior to 6 April 2008, that would have qualified for taper relief, may not now qualify for entrepreneurs’ relief; purely due to the rental payments issue. There is therefore a possibility that there may be some relaxation of the rules in any amended legislation.

If you are contemplating a sale of this type of property please contact us before completing the sale in order that we can help you organise contracts in the most tax efficient way.

HM Revenue & Customs’ new powers!

Like it or not, your future relationship with H M Revenue & Customs has been changed forever, thanks to the Finance Act 2008. Read on to find out how……

In the past regular visits have been restricted to VAT audits and PAYE visits. Additionally inspectors may have picked up on areas of concern in your annual tax return and launched a formal aspect, or full enquiry into your affairs.

Unfortunately the Finance Act 2008 takes this process to a new level!

In future you will be penalised if HMR&C believe you have not taken reasonable care in preparing any information (accounting or otherwise) that underpins any return made to them. It is likely that any under-declared tax that is discovered will be subject to a penalty approaching 30%, and if HMRC can prove negligence or fraud this can increase to 100%.

The way in which these errors will be discovered are set out in changes to HMRC’s legal powers to investigate tax returns. It is envisaged that an officer of HMRC might begin a compliance check in respect of any of the relevant taxes for one or more of a number of purposes. These include checking that:

* a tax return, amendment to a return or claim is correct;
* statutory record keeping requirements are being met;
* tax has not been underpaid or over-claimed; or
* any issues concerning possible tax avoidance are considered.

This means you can expect that future visits by tax officers will take a great interest in the care that has been taken to keep proper accounting records. In particular how these records affect your VAT and payroll returns.

Access to information.

HMRC have included changes to the law in the Finance Bill 2008 that would give them rights regarding access to records that underpin your returns.

There is to be no right to appeal against HMRC seeing records.

Another interesting development recognises the use of computers in storing relevant data. HMRC state:

“An authorised person may, at any reasonable time, obtain access to, and inspect and check the operation of, any computer and any associated apparatus or material which is or has been used in connection with a relevant document.”

This would provide officers of HMRC access to any computer which has been used in connection with the accounting records (including supporting documents) required of the taxpayer. This is a new development, as normally taxpayers would expect HMRC to have access to the records themselves, but not the computers on which the records have been prepared or maintained. The practical implications of this are significant.

You may want to ensure that no critical business information is kept on the same computer as the accounting records, so that risk of breach of confidentiality, or even business disruption, is kept to a minimum should HMRC require access to the computer during the course of an enquiry.

Visits will be made during the year to check that the record keeping provisions are being complied with during the accounting period, and given the significant concern expressed about the quality of accounting records by HMRC and the impact on tax take, this is likely to be the main HMRC compliance contact that small businesses will have in the future.

What does this mean for me?

For most businesses the new rules will have effect for accounting years ending 31 March 2009. Therefore the records that you are presently updating for this period of account may be open to inspection.

Please contact us if you are interested in a formal review of your accounting and related administration systems, in order to minimise any possible financial consequences of future HMRC visits.