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Life Insurance isn’t as expensive as you might think – especially if your company pays for it with Relevant Life Expert.
So, whether you are already paying for life insurance out of taxed income or you have not yet got around to putting vital life insurance in place, a Relevant Life policy could be the most tax-efficient solution.
For more information, contact Relevant Life Expert on 01202 700053 or request your free impartial quote here: http://rlp.relevantlifeexpert.co.uk/relevant-life-expert/
“LIFE COVER WAS NOT SOMETHING I HAVE EVER THOUGHT ABOUT UNTIL I HAD CHILDREN. AS THE MAIN EARNER IN OUR FAMILY, I WAS CONSCIOUS THAT IF SOMETHING SHOULD HAPPEN TO ME, MY FAMILY WOULD BE LEFT IN A TRICKY FINANCIAL POSITION. WHEN I DISCOVERED I COULD ACCESS LIFE COVER IN SUCH A TAX-EFFICIENT WAY THROUGH RELEVANT LIFE EXPERT, I WAS SOLD!”
From April 2016 all employee expense Dispensations agreed with HMRC will cease to apply!
You will need new systems for checking expenses, HMRC will be supply examples.
Expenses which are not covered by benchmark scale rates are likely to paid and taxed via the payroll with the employee claiming relief through P87 and Self Assessment SA100.
Are you ready for the new regime?
It’s not uncommon for Directors personal expenses to get mixed up with business expenses, for example the director is out buying things for the company and picks up some items for themselves at the same time and it goes on the same bill.
In a perfect world the Director would just repay the cost of personal purchases to the company, but we don’t live in perfect world, so what are the options?
Directors Loan Account
You could post the cost to the Directors Loan Account. These accounts are normally repaid when the Director is paid either salary or dividends.
If the loan is not cleared by year end then the company will have to pay a temporary corporation tax charge of 25% and reclaim the tax when the loan is repaid using form L2P
There may also be a notional amount of interest (4%) charged as a benefit in kind on the loan.
Benefit In Kind
You could have the expenses as a benefit in kind, some benefits may even be tax free, here is a list of my favourite tax free benefits
- Pensions – Up to £40k can be paid in to you pension scheme by your employer (2015/16) and you can use carry forward to pay in even more
- Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115) – new rules coming soon
- Mobile Phone – One per employee
- Lunch – Tax Free Lunch Blog
- Cycle Schemes – Cycle to Work Blog
- Fitness – Fitness Blog
- Parties and Gifts – Christmas Blog
- Parking – Parking Blog
- Business Mileage Allowance – 45p for the first 10,000 miles then 25p
- Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
- Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
- Suggestion Schemes – Suggestion Scheme Blog
- Insurance such and Death in Service and Income Protection – Medical Insurance Blog
- Travel Expenses – Travel Blog
- Working From Home – Working from Home Blog
Private Use of Company Assets
It may also be worth considering private use of company assets.
- The cost of the asset is allowed against Corporation Tax and you can claim Capital Allowances and the Annual Investment Allowance.
- The Assets could be purchased from the Director but they must be transferred at Market Value.
- The Benefit In Kind is generally 20% of the market value
The supply of advertising to a charity is zero-rated. The zero-rating covers advertisements on any subject, including staff recruitment. A charity can also purchase pre-printed collecting boxes, envelopes and appeal letters at the zero rate. Low cost lapel stickers, emblems and badges that a charity gives in acknowledgement of a donation can also be zero-rated. More information can be found in Notice 701/58 Charity advertising and goods connected with collecting donations.
Any medium which communicates with the public. This includes all the conventional advertising media such as television, cinema, billboards, the sides of vehicles, newspapers and printed publications. The important factor is whether the advertisement is placed on someone else’s time or space. If it is not there will be no scope for zero-rating.
If space is sold to a charity for advertising on other items, such as beer mats, calendars, or the reverse of till rolls, this will also be covered by the zero rate. The sale of the items themselves will not be VAT free, unless they qualify for other reliefs for example as books or children’s clothing.
Recently I was asked if a website would be able to zero rated, but its specifically excluded under UK Law VCHAR11000
10B None of items 8 to 8C includes a supply used to create, or contribute to, a website that is the charity’s own.For this purpose a website is a charity’s own even though hosted by another person. 10C Neither of items 8 to 8C includes a supply to a charity that is used directly by the charity to design or produce an advertisement.
Yet again, we have another case on Pool Cars which could have been prevented had the right procedures been put in place.
The Case was decided in May 2015 and involved Mark and Trudie Holmes and their company KMS Logistics (UK) Ltd. The company owned 7 prestige cars which were used assist in maintaining and attracting clients.
There was no prohibition (not even a verbal one) on the private use of the vehicles, mileage logs showed that the cars were mainly used by Mr & Mrs Holmes. Until 2003/4 they had been declared as a benefit in kind but then the stopped being declared! There even seemed to be confusion over who owned the cars.
So not surprising Mr & Mrs Holmes lost the case.
Read the full details by clicking here
So what should you do to prove there is no private use:
- Keep the car on the company’s business premises
- Keep the keys at the company’s business premises
- Prepare a Board Minute
- Make sure your contract of employment bans private use
- Keep a mileage log
- Insure the car principally for business use
HMRC have specific rules on keeping vehicles at home in EIM23465
Even if you do meet the 60% rule you still have to prove ‘no private use’
- You will save Tax by having the company pay the premium
- The premium will not be included as a P11D benefit
- Premiums are not subject to National Insurance payments for employer or employee
- Your company can claim Corporation Tax Relief on the premiums
- Benefits are payable tax free
- Benefits do not count towards your lifetime allowance for pension purposes
- You will be assigned your own personalised website link that tracks any client referrals for Relevant Life – www.relevant-life-policy.net (you’ll get your own URL)
- Market/educate/discuss with your clients/members/affiliates and recommend the product along with your personal website link.
- Those interested will then visit the site, watch the video, use the calculator and quickly see the great benefits that Relevant Life offers.
- Referrals can call in or email for a quote or advice. A trained qualified adviser will then aim to book an appointment, complete a recommendation and ultimately make a sale. We’ll also try our best to recommend Health Care/Key Persons Cover and Income Protection, as you’ll receive referral fees on those sales too.
- For each referral you will receive 10% of commissions we receive paid monthly in arrears. If you want to sign up other affiliates to this opportunity (with their own client bank) you’ll receive 5% of the value of any referrals they generate (above and beyond their 10%).
- You’ll benefit from a partner login to your own portal to see the value and stage of the campaign for each client.
- You’ll be assigned an account manager, product literature, and marketing pack (complete with emails and a guide) so that you can start creating your own referrals with minimal effort.
- What can you expect in referral fees? Our newest introducer referred eight clients last month and has generated £2500 from a small campaign on LinkedIn.
- Contact Tom Hitchcock (Director at Broadbench) to discuss the opportunity on 01202 700053 or email email@example.com
- We can then setup the website and marketing campaign
- Get referring
Renting out a Room is a great way to earn some tax free cash and in the Summer Budget an increase in the tax free allowance was announced…
The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016. The value of this relief has been frozen since 1997, so this increase will allow individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rent.
You can use the scheme if:
- you let a furnished room to a lodger
- your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning
You can’t use the scheme if the accommodation is:
- not part of your main home when you let it
- not furnished
- used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
- in your UK home and is let while you live abroad
- the whole of your home, rather than a part of it
You can get further details in HS223
Finding a lodger shouldn’t be too difficult and websites like Spare Room can help.
The rates only apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel used for private travel
If you pay a rate per mile for business travel no higher than the AFR, for the particular engine size and fuel type, HM Revenue and Customs (HMRC) will accept there is no taxable profit and no Class 1A National Insurance to pay.
You can use your own rates which better reflect your circumstances if, for example, your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates.
Advisory Fuel Rates from 1 March 2015
These rates applied from 1 March 2015. You can use the previous rates for up to 1 month from the date the new rates apply.
|Engine size||Petrol – amount per mile||LPG – amount per mile|
|1400cc or less||11p||8p|
|1401cc to 2000cc||13p||10p|
|Engine size||Diesel – amount per mile|
|1600cc or less||9p|
|1601cc to 2000cc||11p|
COMPANY car mileage rates have been slashed by up to 18% as HMRC cut the tax allowance across all six of the petrol and diesel categories in response to continuing fuel price falls.
Hardest hit by the rates, known as advisory fuel rates (AFR), are drivers of company cars with petrol engines greater than 1,401cc which have suffered a 3p cut in rates applicable from 1 March.
Acquisition costs need to split into capital and revenue expenses.
“Several tests have been developed through case law to ascertain whether expenditure is revenue or capital in nature. The ‘enduring benefit’ test, which originated from Atherton v British Insulated & Helsby Cables Ltd  10 TC 155, is one such test.
“In this case, that expenditure incurred with a view to providing the business with an ‘enduring benefit’ was not allowable as a trading expense. ‘Enduring benefit’ means that the expense will benefit the business not just in the year in which it is incurred, but also in the years that follow. [Taxation]
- Legal costs for the property purchase
- Property Acquisition Cost
Capital expenses are only recovered as part of the capital gains calculation when they are added to the purchase cost to reduce the overall gain.
- Mortgage arrangement fees
- Legal fees on arranging loans
- Lenders normally include valuation fees in their charges
Revenue expenses are charged to the P&L and are deductible against income tax/corporation tax.
When loan costs are material they would normally be amortised over the period of the loan in order to apply the matching principle of accounting.
You cannot deduct:
- Expenses incurred in connection with the first letting or subletting of a property for more than a year. These include legal expenses such as the cost of drawing up a lease, agents’ and surveyors’ fees and commission.
- Any costs of agreeing and paying a premium on renewal of a lease.
- Fees for planning permission or registration of title on property purchase.
It had been proposed that there will be a new statutory exemption for trivial benefits up to a limit of £50 from from 6 April 2015, this measure is not included in the first Finance Bill of 2015, it has been deferred until after the election.
The £50 tax exemption would have been on items such as birthday and Christmas gifts. The legislation would have also introduced an annual cap of £300 in some circumstances.
So we are stuck with the old rules for now
An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).
There are some non taxable benefits you be interested in….
HMRC Helpsheet 207 – Non-taxable payments or benefits for employees