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When is a van a car?

Written by admin on . Posted in Company Car Tax, Employment Law, Law, Tax. No Comments on When is a van a car?

The tax treatment of cars and vans is quite different, with van classification far more beneficial from both an employer and employee perspective. However, the distinction is not always clear-cut, especially where vans have been modified to turn them into multi-purpose vehicles.

In what is now being referred to as the “Coca Cola van case”, the Court of Appeal has ruled that three modified crew-cab vehicles provided by Coca-Cola to its employees, who used them privately, are cars rather than vans, despite the vehicles having the outward appearance of a van.

Modification

The three vans in question were panel vans modified with a second row of seats behind the driver, turning them into crew cabs. With two of the vehicles, the additional seats could only be removed with tools. For the other vehicle, the seats were removed during working hours.

Primarily suited

For benefit purposes, classification as a van depends on a vehicle being primarily suited to the carrying of goods.

The Court of Appeal’s view was that the modifications had transformed the three vans into multi-purpose vehicles, equally suitable for carrying either goods or passengers. Not being primarily suited to the carrying of goods, the vehicles therefore did not qualify as vans.

What a vehicle looks like on the inside overrides its outward appearance.

The decision could also see crew cabs reclassified for capital allowance purposes (so no annual investment allowance), but still considered vans for VAT purposes provided they can carry a payload of one tonne or more.

Implications

Employers should be aware of the tax implications of providing similar modified crew cab vehicles where private use is permitted.

The decision will mean a higher benefit charge for employees, and additional class 1A NICs for employers. The change should be applied from 2020/21 onwards, and also potentially backdated to 2018/19 (when the case was heard at the Upper Tribunal).

HMRC guidance on the difference between cars and vans for car benefit purposes can be found here .

Photo by Paul Hanaoka on Unsplash

 

HMRC targets employers over CJRS claims

Written by admin on . Posted in COVID-19, Employment Law, Law, Tax. No Comments on HMRC targets employers over CJRS claims

With reports of two-thirds of furloughed employees continuing to work during the Covid-19 lockdown, despite the initial prohibition of work as an explicit condition of furlough, it is no surprise that HMRC has already written to 3,000 employers it believes may need to repay some or all of the grant they have received under the Coronavirus Job Retention Scheme (CJRS).

Until 30 June, it was a condition of the scheme that furloughed employees cease all work in relation to their employment. Flexible furlough was brought in from 1 July, so HMRC are likely to only pursue the most blatant cases of employees continuing to work, such as where an employer instructed them to do so.

Incorrect claims

HMRC will also be concerned where an employer has:

  • Claimed more grant than they are entitled to, for example, where a claim is based on inflated wage figures.
  • Claimed the grant despite not meeting the conditions such as including ineligible employees.
  • Not passed the grant on as wages to the furloughed employees.

HMRC’s target is those who have deliberately defrauded the system. However, even if they believe no mistake has been made in their claims, any employer contacted by HMRC should respond to the enquiry.

Amnesty

An employer can repay any overpaid amount of CJRS grant without incurring a penalty provided HMRC is notified within 90 days of the later of:

  • 20th October 2020;
  • the date the grant was received, or
  • the date when circumstances changed so the employer is no longer entitled to keep the grant.

Failure to meet the deadlines could result in a minimum penalty of 30% of the grant improperly claimed, with a potential maximum penalty of 100%.

The overpaid amount may be recovered by HMRC making an assessment. Otherwise, the employer will be subject to a tax charge payable on the usual tax due dates for an individual or a company.

Latest HMRC guidance on eligibility for the furlough scheme can be found here.

Photo by Markus Winkler on Unsplash

Defining ‘adversely affected’ for the self-employed

Written by admin on . Posted in COVID-19, Law, Self-Employed, Tax. No Comments on Defining ‘adversely affected’ for the self-employed

Many self-employed workers will have already claimed their second, and final, Self-Employment Income Support Scheme grant, but otherwise have until 19 October to do so. A key condition is that the business must have been ‘adversely affected’ by Covid-19 on or after 14 July 2020, and HMRC has provided guidance as to what this means.

Timing

Since applications will close on 19 October, the adverse effect must occur before then. However, if a business subsequently recovers, eligibility will not be affected.

Amount

There is no minimum threshold over which income or costs need to have changed, so just a small drop in income or an increase in costs will meet the ‘adversely affected’ requirement. Of course, the change must be Covid-19 related.

There are several ways in which Covid-19 could impact on income and costs. For example:

  • Not being able to work due to shielding, self-isolation, sickness or having caring responsibilities;
  • Having to scale down or stop trading due to supply chain interruptions, fewer customers or clients, staff being unable to work or having contracts cancelled; and
  • Additional costs incurred to buy protective equipment to meet social distancing rules.

A business is still classed as ‘adversely effected’ should contracts lost prior to 19 October be subsequently revived.

Records

You need to have records of how and when the business has been adversely affected. This should be fairly straightforward and will often just be a case of noting relevant dates when you were unable to work or trade or saving invoices for additional costs.

As regards income, retain any correspondence for cancelled work. A comparison to the same period for previous years may be needed if a business is open but has fewer customers.

The ‘adversely effected’ requirement will not be met if income has risen compared to last year, even if income would have been even higher if not for the Covid-19 pandemic.

Full details of HMRC guidance can be found here,

Photo by Andre Benz on Unsplash

Coping With Brown Envelope Syndrome

Written by admin on . Posted in COVID-19, Law, Tax, Uncategorized. No Comments on Coping With Brown Envelope Syndrome

It’s estimated roughly 100,000 people a year enter one form of formal personal insolvency or another and Covid-19 is likely to significantly increase this figure. This article is written in the hope that it may provide comfort to some and encourage others to avoid the potholes the content deals with.

Every so often a new client is referred to me for assistance with a challenge in dealing with debt owed to HMRC, and typically, I get the introduction when HMRC’s Debt Management team has stepped in to either collect the unpaid taxes or refer the matter for enforcement action which mostly means the matter has escalated to the point of threats of a statutory demand, bankruptcy proceedings or winding up petition.

There are usually, two main reasons why escalation kicks in: either HMRC is playing hard-ball and not giving the client time to settle the liability or more often than not; the client has suffered from what I like to call “Brown Envelop Syndrome” or BES for short. Not a new term, I’m sure. A quick search of googles reveals tons of articles on this subject; I’m probably not discussing anything new here, but I’ll continue anyway as this is a live and topical issue for many.

Some of you out there may no sympathy for BES sufferers whatsoever, after all, they earned (or in the case of PAYE and VAT, collected) the money and should (when due) pay what is owed. I don’t disagree with you on this but, having dealt with scores of ‘sufferers’, I can assure you this is a real (if not medically diagnosed) ailment – suffered by hundreds of thousands of individuals across the UK. And, like COVID-19, it has no respect for gender, race, religion, politics, football club or anything else we human beings use to differentiate ourselves from others.

The ailment starts with the receipt of, and you will not be surprised to hear this: the arrival of a brown envelope.

Approaching the floor mat with trepidation, then separating out the brown envelope(s): the former opened almost immediately, the latter either opened at a future date or in some instances, not at all. The problem with BES is that despite ignoring the content of the envelope, and wishing the problem will go away, the fact of the matter is credit card bills, HMRC demands, utility bills etc don’t go away because we ignore them. They only attract further demand, the accrual of interest, the arrival of debt collectors, or threats of county court judgements.

Back to my clients – sometimes an individual, often a company. Having finally opened the envelopes and read through the various correspondence from the creditor, I break the bad news to the client on the quantum of the debt owed, and this is then followed a conversation on how best to resolve the matter is had, after which I am engaged to correspond with the creditor to put in place a repayment arrangement, stop any enforcement action and provide my client with the peace of mind in knowing that the tax liability is not going to lead to a county court judgement, an adverse credit rating or insolvency (personal or commercial).

So, if you are a BES sufferer and have a pile of brown envelopes stashed away somewhere. Do not panic, and most importantly: do not ignore them. Set aside your dread and trepidation and go retrieve them, then give me a call on 01925 937 499, or email me at femi@lofusstowe.com or, if you’re really feeling brave; book an initial consultation with me at: https://calendly.com/femiogunshakin

 

Expanding digital tax strategy

Written by admin on . Posted in Law, Tax. No Comments on Expanding digital tax strategy

Details of an ambitious ten-year strategy to create a tax system fit for the 21st century have been released alongside Finance Bill legislation. With the rapid growth of information and communications technologies, the aim is to have a fully integrated digital tax system able to support taxpayers across the whole range of their needs.

There are three elements to the government’s strategy, outlined in the July report.

Making tax digital

At present, making tax digital (MTD) applies to businesses with a turnover above the VAT threshold of £85,000. These businesses are required to keep digital records and to file VAT returns using online software.

Recently announced plans will see MTD extended:

  • From April 2022, the VAT filing requirements will apply regardless of turnover.
  • From April 2023, MTD will apply to all taxpayers filing self-assessment tax returns where their annual business or property income exceeds £10,000.

Once self-assessment taxpayers are included within MTD, HMRC will have access to up-to-date, real time business information which is no more than four months old.

HMRC intends to expand its MTD pilot service from April 2021 to allow businesses and landlords to test the service well in advance of the requirement to join. A consultation later this year will look at how MTD is to be extended to limited companies.

Payment of tax

Although the report makes it clear the extension of MTD to self-assessment taxpayers will not initially see any change to when tax is paid, it then considers what might happen in the longer term. Tax payments could be brought into line with the increasingly real-time nature of tax reporting, with the change making it easier for many taxpayers and businesses to manage their cash flow.

Tax administration

Various suggestions are made under this heading. One very useful proposal is for the government to go ahead with a simplified registration process, so that a business need only register once with HMRC for all taxes.

With HMRC having had to quickly develop additional online systems and help for taxpayers during the Covid-19 pandemic, moving towards a more integrated, real time approach should make such interventions easier to manage in future. Help and support for MTD can be found on the .GOV site.

Photo by Scott Graham on Unsplash

Remote witnessing of Wills in the era of COVID-19

Written by admin on . Posted in Lasting Will & Testaments, Law. No Comments on Remote witnessing of Wills in the era of COVID-19

At a point during the early days of the pandemic, this author, being of a certain age, weight, and ethnic group, took the decision to get his affairs in order – the Coronavirus intensely on the rampage through the country between March and late April. Having discussed update details with my lawyer, and upon concluding on the content and then came the hard part. How does one execute the document? The lockdown and a consequence of social distancing meant this was nigh on impossible

Thoughts went to anecdotal evidence of people turning up outside the homes of friends nominated to act as witnesses: the plan being to sign the Will in their presence then pass the document through the window or under the door for their signature. Apparently, some brave souls actually stepped out of their homes to use car bonnets to both witness the testator’s signature to the Will as well as to add their signatures to same. These challenges were prerequisites of The Wills Act of 1837 which requires two witnesses to be physically present at the moment the testator signs the Will.

In response to the difficulties presented by the pandemic, a major overhaul of probate justice will soon take place in the UK when the Ministry of Justice introduces new rules permitting the ‘remote’ signing of Wills. In an historical move, the government has introduced a statutory instrument allowing testators’ signatures to be witnessed using video conferencing software.

In practice, the new legislation will allow for the testators to apply a signature to the Will and then post the document out to the witness who in turn will sign their signatures via a video link – with the proviso that the online capturing of the signing must ensure it includes the physical act of the witness signing the document. The testator is also required to keep a record of the act of the witnesses’ signing the Will.

The legislation will be laid before Parliament in September and will be retroactive, applying to Wills witnessed virtually dating back to 31 January this year. For further information on video witnessing of Will during the pandemic, click here You can also find practical guidance on making wills using video conference by clicking this link.

Photo by Melinda Gimpel on Unsplash

Insolvency Bill To Help COVID-19 Affected Businesses

Written by admin on . Posted in Law, Restructuring & Insolvency. No Comments on Insolvency Bill To Help COVID-19 Affected Businesses

A new Corporate Insolvency and Governance Bill, introduced on 20 May, will amend insolvency and company law to support businesses in distress from the impact of the COVID-19 pandemic.

The Bill, to be fast-tracked through Parliament, includes some measures which have been previously announced, but are now being enshrined in law. The aim is to provide businesses with the flexibility and breathing space they need to continue trading during the current crisis. Three key measures are a moratorium period, protection from legal action against Covid-19 debts and relaxation of AGM and statutory accounts requirements.

Moratorium period

The introduction of a new moratorium period will give companies a 20-business day breathing space from their creditors to explore rescue options. This can be extended to 40 business days, with further extensions at the agreement of creditors or the court.

The company will remain under the control of its directors during the moratorium, although the process will be overseen by a licensed insolvency practitioner.

Covid-19 related debts

Temporary measures will prevent aggressive creditor action against otherwise viable companies struggling because of COVID-19.

Although commercial landlords have been prevented from enforcing the forfeiture of leases for unpaid rent, some landlords have resorted to other measures.

There is a temporary relaxation of the wrongful trading rules so that directors can continue trading through the crisis without the threat of legal action. This measure will run from 1 March to 30 June.

Meetings and filing requirements

Backdated to 26 March, a company that has held an AGM adhering to social distancing measures, but not meeting the company’s constitution, will be treated as having complied with the law. If a company has been forced to postpone an AGM after 26 March, they will be allowed to hold the meeting (socially distanced if necessary) up to the end of September.

Companies House has already said that companies can apply for an automatic three-month extension to file statutory accounts, and the Bill adds automatic extensions for confirmation statements and changes of details.

Detailed explanatory notes published in conjunction with the Corporate Insolvency and Governance Bill can be found here.

HMRC Pauses Inheritance Tax Investigations

Written by admin on . Posted in Law, Tax. No Comments on HMRC Pauses Inheritance Tax Investigations

HMRC’s recent suspension of IHT investigations during the Covid-19 crisis opens up a brief opportunity for executors to get their IHT accounts in order.

HMRC normally investigates around 5,500 IHT cases every year, around 25% of the estates for which IHT is payable, recovering an average of £50,000 extra tax each time. The complexity of IHT means that extra tax will often be due just because mistakes have been made. There can also be a temptation to use low valuations so that assets are covered by the available nil rate bands. HMRC, not surprisingly, can be expected to look quite closely at such estates.

Common problem areas are:

  • Business relief – Some business activities are borderline and holding non-business assets within a company may mean relief is not available.
  • Agricultural relief – This is only available if land and property is used for agricultural purposes, so HMRC may query whether there is active use, especially if land is just rented out under a grazing licence.
  • Pension transfers – A particularly confusing area of tax, pension transfers are normally not subject to IHT. However HMRC will look at any transfer made within two years of death to see if this was done to avoid IHT. If so, the pension will be included as part of the deceased’s estate.
  • Lifetime gifts – Gifts made to individuals within seven years of death can easily be overlooked, and whether gifts are exempt under the normal expenditure out of income rule can be unclear given the lack of a statutory definition.
  • Post Covid-19

    Given how much the Covid-19 crisis has cost the government, expect to see HMRC being quite aggressive once compliance work resumes.

    There have been calls to simplify IHT and the Office for Tax Simplification published two reports into the issue last year. This now seems unlikely to be high on the Chancellor’s to do list when it comes to the next Budget.

    Find out how to work out and report the value of an estate to HMRC here.

EAT Announces New Practice Direction on Remote Hearings

Written by admin on . Posted in Law.

Etiquette on the conduct of remote hearings during the current lockdown has necessitated the need for the President of the Employment Appeal Tribunal to revisit the rules. In an announcement made today, 12 June 2020, with immediate effect, paragraph 19 of the 2018 Practice Direction is amended to cover the following;

 ·         Procedure where a judge sits with one lay member;

·         Guidance on how partial and full remote hearing will be conducted; and·      

·       A ban on the recording by either party of the remote hearing

For full details of the changes, click here for a link to the full details of Practice Direction (Employment Appeal Tribunal – Procedure – Hearings) 2020