close
Get Started Today

Please fill out the form below and a member of our
team will be in touch with you soon.

    Tag: Tax

    HMRC update: U-turn on benefit in kind on double cab pick-ups

    Posted on by Laura Bannan

    In a surprising turn of events, the Government has reversed its decision regarding the taxation treatment of double cab pick-ups, just a week after making the announcement.

    On Monday, February 12, HMRC made updates to its guidelines regarding the tax implications of double cab pick-ups (see our blog here), prompted by a 2020 Court of Appeal ruling. The updated guidance outlined a significant change: starting from July 1, 2024, all double cabs with a payload of one tonne or more would be categorised as cars instead of goods vehicles, affecting both capital allowances and benefit-in-kind (BIK) considerations.

    Originally, it was going to affect all double-cab pick-ups ordered after July 1, the policy would have left many businesses grappling with unforeseen tax implications. However, vehicles already in use or ordered prior to this date were to maintain their current classification until April 2028.

    Yesterday (19 February), HMRC announced that this new guidance will not come into force. The U-turn in full:

    • The tax on the benefit-in-kind will now not increase when employers provide these vehicles to their employees; and the capital allowances available in the first year of use will now not be reduced when a business purchases this vehicle for use in their trade.
    • This will ensure a continued and consistent treatment of double cab pick-ups for capital allowances, benefit in kind, and VAT purposes, maintaining simplicity in the tax system.
    • HMRC will withdraw its updated guidance during the afternoon of Monday 19 February 2024
    • This update is only with reference to DCPUs with a payload of one tonne or more. DCPUs with a payload of less than one tonne continue to be treated as cars

    Please note that the government are consulting on the treatment of commercial vehicles and there may be a further announcement later in the year, so if you are planning to purchase any type of commercial vehicle, please seek advice.

    If you would like to discuss your situation in more detail, or would like further clarification on HMRC’s U-turn, please get in touch with tax manager, Julie Walsh, by clicking the button below.

    HMRC announce huge change to benefit in kind (BIK) charge for double cab pickups

    Posted on by Laura Bannan

    The PM+M tax team are regularly asked whether a van that carries passengers could be classed as a car for benefit in kind (BIK) purposes.

    Currently, HMRC interprets the legislation that defines a car and van for tax purposes in line with the definitions used for VAT purposes which are based on payload, i.e., anything under one tonne is classified as a car, and anything a tonne and over classified as a van. This rule was replicated as a pragmatic way of resolving the matter.

    However, HMRC have recently announced that, from 1 July 2024, they will no longer use this classification method.

    Going forward, classification of double cab pickups will be determined by assessing the vehicle as a whole at the point that it is made available to determine whether the vehicle construction has a primary suitability of conveying passengers or goods, as per the two-part test used to determine the van or car.

    From 1 July 2024, most if not all, double cab pickups will be classified as cars when calculating the benefit charge. This is because, typically, these vehicles are equally suited to convey passengers and goods and have no predominant suitability.

    Transitional arrangements 

    Where a vehicle is purchased prior to 1 July 2024, the tax remains unchanged until the earlier of the expiry of the lease or 5 April 2028.

    Transitional arrangements will apply for employers that have purchased, leased, or ordered a double cab pickup before 1 July 2024, whereby they will be able to rely upon the previous treatment until the earlier of disposal, lease expiry, or 5 April 2028.

    Where, for example, an order for a double cab pickup has been made on 5 January 2024, but this was not available to the employer until 2 September 2024, as the agreement was entered into before 1 July 2024, the previous rules continue to apply for the employer until the earlier of disposal, lease expiry, or 5 April 2028.

    Capital allowances

    For expenditure incurred before 1 July 2024 a double cab pick-up, with a payload of one tonne or more, will continue to be treated as a van until the earlier of disposal lease expiry, or 5 April 2028.

    For expenditure incurred on or after 1 July 2024 HMRC will no longer interpret the legislation that defines a car for capital allowances purposes as excluding double cab pick-ups with a payload of one tonne or more. Therefore ,the valuable annual investment allowance will not be available when the van is purchased and allowance’s will be restricted to the lower rates available for cars.

    Transitional arrangements will apply when an amount of expenditure is incurred on a double cab pick-up as a result of a contract entered into before 1 July 2024 and the expenditure is incurred on or after that date but before 1 January 2025. In these circumstances a double cab pick-up with a payload of one tonne or more will continue not to be treated as a car.

    Get in touch

    If you have any questions about double pickups and the updated guidance released from HMRC, please do not hesitate to get in touch by emailing at enquiries@pmm.co.uk.

    PM+M reappointed by Blackburn Rovers FC for audit and tax work

    Posted on by Laura Bannan

    We are delighted to have been reappointed by Blackburn Rovers FC in a deal that will see us continue to act as the club’s audit and tax advisers. We will also carry on working with Venky’s London Limited – the club’s parent company – and the football club’s official charity, Blackburn Rovers Community Trust.

    Following a tender process, Blackburn Rovers decided to reappoint us to continue our long standing and strong relationship which dates back over 100 years.

    Helen Clayton, PM+M audit partner will lead the appointed team, supported by colleagues, Neil Jones, who has worked with Blackburn Rovers for the majority of his career, and Ceri Dixon who will focus on assisting Blackburn Rovers Community Trust. Their tax colleagues, Claire Astley and Mark Richmond, will deal with all tax matters relating to the club. They will continue to all report into Mike Cheston, finance director at Blackburn Rovers and trustee at Blackburn Rovers Community Trust. The team will also work closely with the Blackburn Rovers’ wider finance team.

    Helen Clayton commented: “The whole firm is incredibly proud to have been reappointed by Blackburn Rovers. We have a relationship that spans over 100 years so this agreement is the next phase of our journey together. The club represents something special to the whole town and playing a small part in its success is a fantastic motivator. We are determined to continue adding value and helping to make it thrive.”

     Mike Cheston added: “We are delighted to have reappointed PM+M as our key advisers. The firm has an amazing pedigree and an unrivalled understanding of our operations. It too has Blackburn running through its veins so sharing a mutual passion for the town and its people makes the fit seamless.”

    600,000 people miss Self Assessment tax return deadline

    Posted on by Rebecca Campbell

    According to HMRC, 600,000 taxpayers missed the submission deadline for 2021/22 income tax Self Assessment on 31 January.

    If you are one those who is yet to submit their tax return, don’t delay! We recommend submitting your income tax Self Assessment as soon as possible. Although you will still incur the initial £100 fixed penalty, if you delay until the end of February, an automatic 5% penalty will be applied after 30 days (effectively by midnight on 2 March 2023) on any outstanding tax which remains unpaid. Additional 5% penalties can be applied on any tax which is still owed after 6 months and again after 12 months.

    Latest statistics from HMRC show that in the period from April 2022 to December 2022, penalty revenues of £529 million were raised across all taxes and duties. A 27% increase from the same period a year prior, and a 72% increase in penalty revenues from the same period two years previous.

    The ongoing cost of living crisis and rising interest rates to tackle inflation mean that HMRC may see penalty revenues grow even further over the coming months, with late payment interest due to rise from 6% to 6.5% on 21 February 2023.

    If you are unable to pay your tax bill, engaging with HMRC and a trusted tax adviser as early as possible is beneficial and offers the best chance of mitigating financial penalties.  There are options available for taxpayers to explore including ‘time to pay’ arrangements to avoid accruing additional penalties, however, late payment interest will still be charged.

    Get in touch

    If you haven’t submitted your tax return for 2021/22, and need help or advice to avoid incurring further penalties, please speak to your usual PM+M adviser or get in touch by emailing enquiries@pmm.co.uk.

    MTD for ITSA deferred for 2 years

    Posted on by Helen Buchan

    The treasury has confirmed that there will be a delay of 2 years to the timetable for Making Tax Digital for Income Tax Self-Assessment. Due to come into effect from April 2024, this deadline has now been pushed to April 2026.

    This is welcome news given the overwhelming calls from tax and accounting bodies that the IT structure simply isn’t ready for implementation yet. However, it does mean it’s another movement of goalposts which makes it difficult for businesses and landlords to plan ahead with any degree of certainty.

    The full adjustments announced to the scope and timing of MTD for ITSA include:

    • The 2-year delay until April 2026 for mandatory MTD ITSA filing
    • Minimum income reporting level increased to £50,000, with those earning more than £30,000 mandated to join the scheme in 2027
    • The situation for landlords and sole traders earning less than £30,000 will be reviewed
    • Partnerships will not be brought into MTD for ITSA as previously planned in 2025
    • Points-based penalty system will be extended to MTD ITSA filers when they join

    The minister wrote, “The government understand businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition for MTD for ITSA represents a significant change for taxpayers, their agents, and for HMRC.”

    They have allowed more time to prepare, “so that all businesses, self-employed individuals, and landlords within the scope of MTD for Income Tax, but particularly those with the smallest incomes, can adapt to the new ways of working.”

    The full statement can be read here.

    However, there has been no confirmation as to whether this is likely to impact the basis period reform for the self employed and partnerships. The timing of this was originally aligned to fit in with the start of MTD for ITSA in April 2024 to get everyone onto a real time, tax year basis of profit reporting.

    We will keep you updated on any further changes and how these may impact you.

    Get in Touch

    If you have any questions in relation to MTD for ITSA, please get in touch with your usual PM+M adviser or email enquiries@pmm.co.uk.

    Claiming tax relief for a garden office

    Posted on by Laura Boyd

    During the pandemic, millions of us were forced to work from home and many continue to embrace this change.

    If you run your own company, you might have considered installing a garden office as a workspace – but have you thought about the tax implications?

    Initial build costs

    It is acceptable for the initial cost of the structure, and any other associated expenses, such as planning costs, architect fees and legal fees to be paid in full by your company.

    However, these costs will not qualify for tax relief, as they will be treated as capital costs.

    There are certain elements of the build which might however attract tax relief through the capital allowances regime, including:

    • installation and supply of power;
    • certain new fittings and fixtures etc;
    • installation of heating equipment;
    • thermal insulation;
    • air conditioning.

    A detailed inventory should be kept of all parts of the build cost to support any claims for capital allowances.

    What is the VAT treatment?

    If the garden office is intended for 100% business use, the VAT charged on the capital costs may be recoverable in full by your company (assuming it is VAT registered).

    However, if there is an intention for an element of private use, then a proportion of the VAT should not be reclaimed.

    Similarly, once the office is functionable, ongoing costs such as light, heat, redecoration and repairs may be paid for by the business, and 100% of the VAT can be reclaimed, if the office is used solely for business purposes. However, if there is some private use, the amount of VAT that could be reclaimed would need to be restricted.

    It is therefore important to remember that if the garden office has any personal use, for instance as a guest room for visitors or even a place to sit at the weekend to read a book, then tax relief will be restricted.

    Although many people install a garden office for the sole use of working from home, it can be extremely difficult to prove to HMRC that you do not ever intend to use the building for any personal matters.

    If you intend to use the office for business only, it would be prudent to have an agreement between the company and you prohibiting any private use.

    Is there a benefit? – Income tax considerations

    If the garden office is to have some personal, use, there would be an annual taxable benefit in kind, which would need to be reported on the employee/director’s P11D.

    If the office is to be used wholly for business purposes, there should be no such benefit in kind.

    Moving house – capital gains tax considerations

    Often, when you sell your home, any capital gain is exempt from CGT due to the availability of “main residence relief.”

    However, where part of the house has been used solely for business purposes, such as a garden office, a proportion of the gain might then become subject to CGT as main residence relief would be restricted.

    If there is some private use of the office, then main residence relief might then be due in full (although there are various conditions that need to be met for that relief to be available).

    Clearly if there has been private use, this will affect the VAT and income tax treatment as detailed above.

    Other considerations – business rates

    Business rates may be assessed on the building if there is 100% business use – this should be checked with your relevant local authority.

    If your local council decides that your garden office is subject to business rates, you may be able to reduce the cost by obtaining small company rates relief which can be used by properties with a rateable value of £15,000 or less. If the rateable value is £12,000 or less, there will be no business taxes to pay.

    If there is some personal use, then business rates will not be applicable.

    Get in touch

    Building a garden office for business purposes, and paying for it through a limited company, may sound tempting, but it comes with its complexities.

    If you would like to discuss the tax implications of installing a garden office, please get in touch with Wendy Anderson by clicking the button below.

    Important update regarding working from home allowances

    Posted on by Laura Boyd

    Employees should be checking their tax coding notices and employers should be reviewing practises relating to “tax free” working from home payments with immediate effect

    HMRC have recently issued confirmatory guidance that, with effect from 6 April 2022, the relaxed tax reliefs for employees who worked from home during the coronavirus pandemic will no longer be available.

    Tax relief was available to those employees who worked from home due to the lockdowns imposed as a result of the pandemic, irrespective of how many days were actually worked from home. These relaxed reliefs were available for the entire tax years 2020/21 and 2021/22.

    Relief was typically given via a deduction in individual PAYE tax coding notices, or by employers making tax free payments to employees of up to £6 per week, £26 per month or £312 per year.

    As a result of the changes confirmed by HMRC, flexible working arrangements where employees choose or employers enable homeworking will now no longer qualify for the relief, unless there is a requirement for the employees to work from home or the situation is such that the employee cannot work from the business premises.

    Two immediate actions arise as a result of the change in the position:

    • Employees should be reviewing their PAYE tax codes to ensure that they do not include a deduction for the working from home allowance, unless they are actually due the relief.

    It has become apparent that a number of tax codes issued by HMRC to employees for 2022/23 continue to include such deductions.

    Unless an employee is required to work from home for the purposes of undertaking their job, the working from home relief will no longer be available and those employees should request that their tax codes are adjusted to remove this relief.

    If the codes are not amended, further tax will be due following the end of the tax year or at such a point following an amendment to their tax codes.

    • Employers should be reviewing their practises if they have been making “gross” payments to employees via the payroll in relation to working from home allowances.

    Under the relaxed rules, payments of up to £26 per month could be made tax free.

    These payments should now cease unless the employees are entitled to them as a result of them being required to work at home.

    If you wish to discuss any of the above, please get in touch using the button below.