New fuel rates published by HMRC

Old petrol pumps in Nøtterøy, Norway

Image via Wikipedia

Changes have been announced to the company car advisory fuel rates with effect from 1 July 2009.

Unless you do a huge amount of private milage, you probably shouldn’t be provided with fuel for ‘private use’ because the tax charge on this is now very high. The rates below you can use to calculate the petrol cost of your private motoring, if you pay this back to your employer to avoid the fuel based benefit in kind charge.

Employers can also use the figure to isolate the petrol cost of car mileage claims in order to recover an appropriate amount of VAT – businesses still need to retain fuel receipts.

Some of the rates have been reduced in light of slightly lower fuel prices at the pumps.

Engine size: Petrol, Diesel, LPG

1400cc or less: 10p, 10p, 7p

1401cc to 2000cc: 12p, 10p, 8p

Over 2000cc: 18p, 13p, 12p

Petrol hybrid cars are treated as petrol cars for this purpose.

The fuel rates are usually reviewed twice a year effective 1 January and 1 July although may change more often where there is significant fluctuation in fuel prices. The rates are ‘advisory’ so if you have justification, you may use a different rate.

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Cayman Islands join the fold

Cayman Island Reef
Image by slack12 via Flickr

Our Government and that of the USA are serious about clamping down on the use of overseas tax havens to avoid tax, the latest development involves the Cayman Islands.

Now, it is a little known fact that Graham Davies applied for a job in the Cayman Islands shortly after qualifying as a Chartered Accountant! The job was managing a portfolio of ‘captive’ insurance companies. These allow wealthy companies to pay insurance premiums to their own off shore insurer. This is legal, although HMRC are anxious to see that the premiums are at a ‘market’ rate. (No I didnt get it, if I had, you wouldnt be reading this!)

A new Double Taxation Arrangement (DTA) between the UK and the Cayman Islands was recently signed in London.

The new DTA has been drafted to allow for the avoidance of double taxation and for the exchange of information necessary to prevent fraud. The arrangement will apply to taxpayers who are resident in either the UK, Cayman Islands or both jurisdictions. In the UK the agreement will apply to income tax, corporation tax, capital gains tax (in relation to the exchange of information), inheritance tax and VAT.

The exchange of information provisions meet the OECD standards and it is expected this new DTA will help combat tax avoidance and money laundering involving both countries.

The DTA will take effect once both countries have finalised the legislative procedures needed to give the arrangement the force of law in both countries.

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Paternity leave plans go on ice

Dad and children  on the tour
Image by Photosbychristensen via Flickr

The Government has bowed to pressure from business and proposals to extend paternity leave to six months from April 2010 have been put on hold as a result of the recession.

The Work and Families Act 2006 allows for regulations to be made which would permit working fathers to take up to 26 weeks of additional paternity leave, some of which can be paid, if the mother returns to work before the end of the one-year maternity leave period to which she is entitled.  The new provision would be available during the second six months of the child’s life, so in effect, fathers would be able to ‘share’ some of the maternity leave which is currently only preserved for the mother.  The entitlement would also extend to couples who are adopting and to partners and civil partners of mothers.

The Government had stated some time ago that the earliest date additional paternity leave and pay would be implemented was for babies due in April 2010.  However, a Government spokesman has now said that the Department for Business Enterprise and Regulatory Reform is continuing to review the appropriateness of all new regulations due to come into force in the current economic climate and, as a result, a date has not yet been announced for extending paternity rights.

At the same time, the Government had proposed to extend statutory maternity pay and statutory adoption pay from nine to 12 months (to coincide with the period of maternity and adoption leave) and it looks as if this is also on hold.

Under the current law, working fathers are only entitled to two weeks’ paid paternity leave, which is usually taken immediately after the baby is born.

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A beginners guide to ‘flipping’ a second home.

LONDON, ENGLAND - MAY 23:  A 'Government of th...

We have all seen and heard comments in  the  media  about  MPs “flipping” their properties in order to avoid capital gains tax on selling their  second  homes.

You might be wondering what does this mean? And is this a game  anyone  with  more  than  one “residence”  can  play? …read on

The hysteria has surrounded the facts that

  • MP’s have been able to purchase a second property with a mortgage of up to £300,000 funded by the taxpayer, then ‘flip’ to avoid or minimise the capital gains tax payable.
  • Some MP’s have nominated one property as their second home for House of Commons expenses purposes, and a different home as the second home for CGT purposes.

Lets start with some basic rules

  • You are exempt from CGT on a gain from selling your  “main  residence”,  and you  can  only  have  one  main  residence  at  the same time.

  • If you are married or in a civil partnership, you can only have one main residencebetween the two of you.

  • The one  exception  to  this  rule  is when a property has been your main residence at any time during your ownership of it, in which case exemption extends to the last 36 months before you sell it, even if in fact you have another main residence during that period.

The purpose of this exception is to make some allowance for the fact that you may need to buy a new home before you manage to sell the old one. Certainly a consideration in todays marketplace.

When you have more than one “residence”, the law allows you to nominate which one is to be treated as your “main residence” for tax purposes and so enjoy the exemption from CGT. You must do this within two years of having a choice, ie more than one residence.

Once you have made this nomination, by writing to the tax office that deals with your tax affairs, you can subsequently vary that nomination at any time in the future, and the variation can be backdated by up to two years. In the case of a married couple or civil partnership, both must sign the nomination and any subsequent variation.

For example:

Ian buys a holiday home in North Wales in December 2006. In January 2007  he writes to his tax office to make an election that his home in Stockport should be his ‘main residence’. In July 2009 he decides to sell the holiday home.

He writes to the tax office in July 2009 ‘varying’ the election making the North Wales property his main residence. Two months later, he writes again making the property in Stockport again the main residence. Because   the   North Wales property was   properly   nominated   as   his  “main residence” for a period (July and August 2009), the last 36 months of the gain are exempt from CGT.

The house in Stockport has a period of two months when it was not the ‘main residence’ and the eventual gain on the sale of this property will need to be time apportioned and the two month period will not be exempt. However, the chances are that the gain for such a short period would be covered by the annual exemption from capital gains tax, which most people rarely use.

It is important to make the election in the first instance, when two homes are available. If the election is not made, then there is no opportunity to vary it. If you have failed to make the election within the time limit, please do speak to us about the situation,  we can advise on the options available.

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