Tax and the Electric car revolution

electric tax accountants kendal cumbria grange

From 1 September 2018 a new advisory fuel rate of 4 pence per mile applies to electric vehicles. This means that if your employees have electric company cars and they meet the cost of electricity for business journeys, you will be able to reimburse them at a rate of 4 pence per mile without triggering a tax liability or having to report the payment to HMRC. If, however, the payment exceeds 4 pence per mile, any excess over that amount is taxable and you must report the profit element to HMRC on the employee’s P11D or deal with it through the payroll.

Speak to the electric car accounting experts in cumbria to find out what the new rate means for your business.

ELECTRIC CARS

From 2020/21 new company car bands are being introduced which will significantly lower the benefit in kind tax charge for electric company cars. The benefit in kind tax charge for electric cars and those with emissions of between 0 and 50g/km is currently 13% of its list price; this is to increase to 16% for 2019/20. However, from 2020/21, the charge for zero emission cars will drop to 2%, whereas that for cars in the 1 to 50g/km band will depend on the electric range of the car, as set out in the table below:

CO2 emissionsElectric rangeAppropriate percentage
0g/km2%
1–50g/km 130 miles or more2%
1–50g/km 70 to 129 miles5%
1–50g/km 40 to 69 miles8%
1–50g/km 30 to 39 miles12%
1–50g/km Less than 30 miles14%

Looking ahead, the potential tax savings to the employee from choosing an electric car are significant. The reduction in the charge will also reduce the amount of Class 1A National Insurance that you, as an employer, will pay.

Speak to Electric car tax advisors Grange, Kendal and Ulverston to see how you can plan ahead to make the most of these changes.

ELECTRIC CHARGING POINTS

No fuel benefit charge arises if you provide electric charging points for your employees to use to charge an electric company car. HMRC do not regard the provision of electricity to power a company car as a ‘fuel’ and consequently there is no fuel benefit charge if you meet the cost of electricity for employees’ private journeys in an electric company car.

With backdated effect from 6 April 2018, a new exemption is being introduced which prevents an income tax charge from arising if an employee uses an employer provided charging point to charge their own electric or hybrid car, or one in which they are a passenger. However, the exemption only applies to electric charging points provided at or near the workplace, and is dependent on charging facilities being available to all employees who wish to make use of them. However, if you have more than one site, you do not need to provide a charging point at each of them for the exemption to apply.

 

 

RENT-A-ROOM RELIEF – NEW QUALIFYING CONDITION

Rent-a-room relief allows you to let out one or more furnished rooms in your own home and enjoy rental income of up to £7,500 tax-free per year. However, the ability to use the relief to shelter income from short terms lets (for example via Airbnb or similar) is to be curtailed from 6 April 2019.

From that date, a new condition is to be introduced which will mean that rent-a-room relief will only be available if there is at least one night of overlap during the let where you or a member of your household also sleep in the property. This will affect you if you let out your property while you are away.

If you are affected by this change, speak to the best accountants in Cumbia! about what it means for you.

AGREEING A PSA (PAYE Settlement Agreement) TO SAVE WORK

A PAYE Settlement Agreement (PSA) allows an employer to settle the tax on certain benefits and expenses on the employee’s behalf. This can be useful, for example, to generate goodwill and preserve the beneficial nature of a benefit. Items included in a PSA do not need to be reported to HMRC on the employee’s P11D.

The administration of PSAs has been simplified such that it is no longer necessary to set up a PSA each year. Once a PSA is in place, it is an enduring arrangement until such time as it is changed by either the employer or HMRC.

Contact your professional adviser to discuss how a PSA can help you save work.

Why your sales forecast is off

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Monthly Focus August 2014

You Could Pay Less Tax This Year – Business Reinvestment

Annual Investment Allowance  
This month I would like to talk about the generous tax savings available for the purchase of Plant and Machinery. I start by looking at the Annual Investment Allowance.
The Annual Investment Allowance has been around since April 2008 and many business owners have benefited from reinvesting money into their business by way of assets and then reducing their tax bill in the process, but there is still uncertainty with some business owners around whether or not the entitlement extends to them and whether the allowance is still here.

The Facts:-
•    The Annual Investment Allowance is available to all business owners whether trading through a Limited Company, Partnership or as a Sole Trader.

•    The Annual Investment Allowance limit is £500,000 as from 1 April 2014 but is calculated on your trading year end.

So what does this mean:-
•    You can claim 100% of the cost of purchasing certain Plant and Machinery against taxable trading profits and reduce your tax bill

•    If you have not made a profit, an adjustment to the tax computation can be made to roll back the loss incurred or roll it forward for future use

Who does this relate to:-
•    Anyone running a business

So if you are thinking of investing in Plant and Machinery, now is the time to do it but, what about cash flow?
OK, so you know you need a new piece of equipment but you don’t have the cash to spend, so how are you going to finance this?

This is a question I am asked regularly.
Q: Can I still have the allowance if I buy the asset on hire purchase?
A: Yes

Assets purchased on finance are eligible to the same treatment as an asset purchased outright, so if you buy a machine on finance, it is still capitalised and the whole cost is deducted from the profit straight away.

An example of this is:-
A Ltd Company with Taxable Profits of £50,000 paying Corporation Tax at 20% buys a machine costing £20,000.

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Going Green
Don’t forget that any investment which is approved environmentally friendly or energy saving also qualifies for 100% first year allowances.

And Cars
Cars do not qualify for the Annual Investment Allowance but Vans do!

However, Cars with zero or very low C02 emissions could qualify for 100% first year allowances.

For more information about purchasing assets and whether or not that asset would qualify, contact me. I would be happy to hear from you.
See you next month for our next edition and don’t forget to let me have your questions so I can build an interesting focus for next time.

Gemma