Presentation on theme: "ACFO Midlands Region 26 September 2012 John Messore Director Innovation Professional Services Limited – employee benefits and pensions specialists Market."— Presentation transcript:
ACFO Midlands Region 26 September 2012 John Messore Director Innovation Professional Services Limited – employee benefits and pensions specialists Market leader in car and fuel taxation Contact email@example.com@innovationllp.com 07884006164
Innovation Tax and employee benefit specialists All partners trained with the Big 4 Accountants Two partners sit on the Institute of Tax Technical Subcommittees Our business grew 60% last year and 90% this year Recently nominated for the third year running as the best tax consultancy team in the UK Mostly work on a no win no fee basis and only charge a % of employer saving after it is secured
AGENDA Introduction 16 WAYS FOR FLEET MANAGERS TO SAVE £500-£3,000 A CAR AND BENEFIT STAFF BY UP TO £3,000 EACH WITHOUT ANY ADITIONAL ADMIN Lets keep it interactive – questions as we go; show of hands to see what is most relevant
HMRC statistics on cars, fuel and vans Numbers (000s)2004/52005/62006/72007/82008/910/11 Car12001140116011201080950 Fuel410380360340310240 Vans300170130709060 Van Fuel40 Taxable value £millions Car425041304030406039203630 Fuel11401050970900830800 Vans1106050170180160 Van Fuel20
1. Mileage tracking We have our own mileage capture / audit system Free to clients Very low cost to non tax clients Very easy to use from any computer I-phone or smart phone Reduces employee fraud Full audit service is available Whole range of very useful management information Can be used to facilitate some of the schemes and cost savings on the following pages
2. Cash or car? Previous trend towards ECOS or PCP Companies are now moving the other way Salary sacrifices for a 2 nd or 3 rd family car Why pay 40% or 50% tax on cash when you can pay 5% or 10% tax on a car? Be careful however as some cars taxed now at 10% will be taxed at 15% in 2012/13 due to realignment of the CO2 bandings Innovation offers a free review of which option is best
3. Free Fuel Very few companies now offer this less, than 10% Incredibly tax inefficient Companies should buy it out! 2 ways to buy-out: – Innovation way – Wrong way
Free Fuel net benefit – BMW 525TDi (1998-2011) Private miles14,00014ppm Year endedFuel BIK £Car BIKTax £Cost of fuel £Effective Tax Rate Net Benefit £ 19981,4906,7505961,40242.51%806 19991,8906,7507561,44552.31%689 20002,2706,7509081,49060.94%582 20013,2006,7501,2801,53683.33%256 20023,6006,7501,4401,58490.93%144 20034,2005,6701,6801,633102.90%-47 20043,1685,9401,2671,68375.29%416 20053,3126,2101,3251,73576.35%410 20063,4566,4801,3821,78977.28%406 20073,7447,0201,4981,84481.21%347 20083,8887,2901,5551,90181.80%346 20094,7327,5601,8931,96096.58%67 20104,7327,5601,8932,00094.65%107 20115,2207,8302,0882,040102.35%-48 For 50% (60%) Higher Rate Taxpayer 5,220 2,6102,040127.94%-570 (-1,092)
Taxable benefit (£) for cars and fuel 1998-2011 (£14,000 Ford Focus)
Fuel Buyout! With fuel being taxed on an arbitrary figure of £20,200 why not consider a buy-out? Innovation has developed a process to buy out free fuel whilst still letting employees keep and use a fuel card for both business and private journeys in exactly the same way as now – but with an incentive to drive fewer miles or more economically (green agenda) Employees are kept neutral in every single respect but some employees could end up better off by around £300-£600 now and £2,000 - £3,000 in 2013 Employer saves £1,000 per employee, p.a.
Company cars - Advisory Fuel Rates from 1 September 2012
4. Total People Ltd v HMRC Recent case said you can treat a car allowance payment as being made up of two elements: – A tax free business mileage top up payment taking you up from say 12 ppm to 45 ppm – A balancing payment, taxable as now Case also said you can go back 6 years to recover overpaid employer NIC in prior years. (NIC on the difference between AFR and AMAPS rates x number of business miles) Worth c. £1,000 NIC a head on average to the company
Cheshire Employer and Skills Development v HMRC HMRC appealed and won their appeal this summer, but…. See my articles in Taxation, Fleet-World and Fleet-News. Judge got it wrong. He based his judgement on a piece of legislation that wasnt even being argued about. CE&SD are appealing so Watch this space. You can still save money going forward by changing what you do. Above case was just about the past! WORTH YOU PUTTING IN A PROTECTIVE CLAIM IF NOT ALREADY DONE SO.
6. AMAPS and NIC New AMAPS rates permit 45 ppm upto 10,000 business miles p.a. After 10,000 business miles, you can pay tax free up to 25ppm BUT you can still pay up to 45ppm NIC free By toping up current AFR or AMAPS mileage payments combined with a salary sacrifice you can make incremental NIC savings Why not squeeze every last penny?
7. Antique Buildings v HMRC Mixed use assets A case was recently lost by HMRC who said they are not appealing They conceded the law was flawed Previously they had maintained that if an asset or benefit was part business / part private then the whole amount should go on the P11D (on which 13.8% Class 1A NIC is paid by the employer) And the employee should claim personal tax relief for the business element on their own tax return This was held to be wrong
Antique Buildings v HMRC Mixed use assets Consider a fuel card provided to staff with their own car Can one just declare the private element on the P11D? Indeed can one go further and top up the cost of fuel for business motoring to 45ppm and reduce the private cost accordingly? At around 25% business usage it should therefore be possible to pay no tax at all on the fuel card even though 75% of the cost was for private motoring It is worth obtaining specialist advice on this
8. Gurney (H M Inspector of Taxes) v Richards, 1989 Case concerned a Fire Engineer driving a car with flashing blue lights and always on call. 4 May, 1983 - 17 February, 1984Rover 2.3 litre 18 February, 1984 - 20 May, 1984Morris Marina 1.7 litre 21 May, 1984 to May, 1986Ford Cortina Estate 2.0 litre May, 1986Ford Sierra 2.0 litre Question - Was the vehicle one commonly used as a private car? Held that cars were not suitable for normal private use and so NO car benefit in kind existed and not taxable as a company car
Gurney (H M Inspector of Taxes) v Richards, 1989 contd HMRC have now carved out cars with flashing blue lights saying these are tax exempt Judge made no mention of the colour of lights So what if you have a fleet of highway maintenance cars with flashing orange lights? Why pay tax on a car benefit if dont need to? It will all of course turn on the particular facts
9. Car Benefit In Kind Whitby & Ball (Branall Ltd) 2009 Company leased cars. On-leased to employees who paid commercial lease cost. No P11D benefit reported. Unfortunately – but not unexpectedly they lost Deduction available against P11D benefit based on what employees actually contributed / paid the company.
10. Is car available for private use? If car not used privately - but still available then a car benefit exists e.g. £25,000 list price x 20% CO2 = £5,000 benefit. Only exception is where it is available for part year or not available for 30 days or more. If car NOT available (and not used privately) then there is no P11D benefit. We have helped a number of companies to successfully argue that a car was not available for private use.
11. Lorry and van drivers (mobile employees) In April 2009 HMRC introduced Benchmark Scale Rates Drivers who are away on business can claim £5 or £10 tax free subsistence per day (and also £5 for breakfast for an early start and £15 tax free for an evening, late finish) provided they satisfy certain conditions – being away from home or their normal workplace for more than 5 or 10 continuous hours respectively and – incurring a cost on a meal By combining payment of such tax free allowances with a salary sacrifice it is possible to save c. £500 per annum per driver
Per Diems, Benchmark Scale Rates Benchmark Scale Rate Salary Sacrifice Scheme Employee split Number of days p.a. on the road assuming 47 working weeks Basic rate taxpayers with qualifying days Higher rate taxpayers with qualifying days Tax free amount payable per annum at £10 or £5 Total field based employees5000 Basic Rate Higher Rate % spending more than 10 hours a day away from home10500 223 250 558,125 % spending more than 5 hours a day away from home854250 223 2,125 2,372,031 Balance below 5 hours a day5250 - - Total staff100 5000 2,375 2,930,156 Total Percentage of staff who are Basic rate taxpayers (earnings over £40k p.a.)50 Employer NIC saving 404,362 £808,723 Percentage of staff who are Higher rate taxpayers (earnings over £40k p.a.)50 Employee savings NIC 351,619 58,603 £410,222 Employee tax saving 586,031 1,172,063 £1,758,094 Percentage of days per annum on the road or field based95 937,650 1,230,666 £2,168,316 Total tax/NIC saving 1,342,012 1,635,027 £2,977,039 Percentage of staff falling out under 2 year rule, i.e. on same site for more than 24 months.0 Benefit passed to employer 656,355 861,466 £1,517,821 How much of employee saving kept by employee30 Total Employer saving p.a. 1,060,717 1,265,828 £2,326,544 Savings kept by employees p.a. 281,295 369,200 £650,495 Basic Rate Higher Rate Employee average savings per head (extra take home pay) 113 148
12. Vans Van benefit in kind is now £3,000 and van fuel is £550 Recently a company with a £35 million turnover was fined £1.35 million back tax and NIC because they had no controls around vans and could not prove there was no private use Armed with this success HMRC have issued a 4 page – 35 question questionnaire for their Inspectors – We can provide free copies on request It is however possible to still permit private use in certain circumstances and still avoid tax altogether
13. VAT recovery through AFR VAT can be recovered on the fuel element of any business mileage claim As AFR rates increase it is an opportunity to recover more VAT on business mileage One company recently successfully submitted a back claim for £300,000 in VAT on business mileage expenditure Contrary to popular belief you do not necessarily need a full VAT invoices to support VAT recovery. HMRC manuals simply say you need to have evidence On VAT dont forget Output VAT scale charge on free fuel 50% lease restriction on cars and 50% on vans
14. Business mileage definitions – home to office deduction Are your staff deducting home to office before making a business mileage claim? If so they can still obtain tax relief on that through self assessment Better still pay it via a salary sacrifice and – Employee receives tax refund earlier – They also get the benefit of NIC relief – Employer saves 13.8% NIC
15. Capital V Revenue contributions Taking a revenue contribution rather than capital can lead to significant savings We recently saved a client £50,000 in Class 1A NIC along though chance corridor conversation
16. VAT recovery on short term contract hire VAT recoverable in full if car is meant for business use primarily Not replacing a genuine company car.
Summary - £ savings 1.User friendly on-line business mileage tracking 2.Cash or cars, £1,000 a head 3.Fuel buy out, £1,000 a head 4.NIC relief prior years – protective claim, £1,000 p.p. 5.Sweat business miles AMAPS v AFR, £1,000 total saving going forward (employer + employee) 6.Sweat NIC on above 7.Mixed use assets – P11D Class 1A savings £00s per head 8.Specialist vehicles (orange flashing lights) £2,000 per vehicle.
Summary - £ savings 9. Cars leased to staff 10. Is the car used privately at all? Saving £000s 11. All staff - tax free subsistence, £500 p.a. p.p. 12. Vans – avoiding penal penalties / tax £000s 13. Maximize VAT recovery on business miles £100-£200 p.p. 14. Home to office commute deductions, a few £100 each (employer and employee) 15. Capital v Revenue contributions (£100s) 16. VAT on short term hires
Disclaimer The preceding slides form a high level view and should not be acted on in isolation without taking specialist advice and all tax planning and mitigation ultimately will turn on the facts of any particular matter