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Do you get tax free parking?
If you work in town or city parking costs can be high.
So if your employer gives you a parking space its a big help.
There is a tax exemption (tax and NI) for parking facilities that are within a reasonable distance of where you work and its not restricted to on-site parking.
The parking space can also be used in the evenings and weekends and isn’t restricted to the nearest car park.
You can also use Salary Sacrifice.
See EIM 21685 for further details
So yes its tax free, so why is there any confusion?
Well a few years ago (2009), we had stories like….
Commuters who drive to work face a new ‘parking tax’ of up to £350 a year.
Ministers are backing a ‘workforce parking levy’ which will come into force in Nottingham in 2012 – and is likely to be adopted across the country.The pilot scheme will see firms with more than ten parking places for staff charged £250 a year for each, rising to £350 in two years.
Can I have a Tax Free Lunch?
Let’s look at the options….
Exemption for Canteen Meals
Employees can be provided with free or subsidised meals provided generally to employees served on the business premises where the following 3 conditions are met:
- The meals are provided on a reasonable scale
- That all employees or all those at a specific location may obtain free or subsidised meals
- If the meals are provided in a restaurant or hotel at a time when meals are being served to guests/clients part of the dining area is designated for employees
Not everyone needs to use the facility they just need the option to use it and its is possible for senior management to have superior meals.
This exemption is not available where only select employees are able to get a free lunch.
HMRC are happy to accept Tea and Coffee as trivial benefits that can be ignored.
Benchmark Subsistance
Since April 2009 employers have been able to pay their employees HMRC approved flat rate allowances referred to as Benchmark Subsistance, the rates are:
- £5 if you buy a breakfast and start your business journey before 6am
- £5 if you’re out of the office on business for more than 5 hours, and buy one meal
- £10 if you’re out of the office on business for more than 10 hours, and buy 2 meals
- £15 if your business trip keeps you beyond 8pm, and you buy an evening meal
So £15 is the maximum
You can only claim if:
- travel is required as part of your dutues or you are working at a temporary work place
- you are away from your work place or home for more than 5 hours
- you are expected to pay for food and drink after starting your journey
Meal Vouchers
Vouchers can be issued tax free but only up to the value of 15p per working day and the voucher must be non-transferable and used for meal only.
Travel Expenses
I have separate blog on this topic http://stevejbicknell.com/2013/02/13/what-travel-expenses-will-the-taxman-allow/
steve@bicknells.net
Importing transactions into your accounts system
I find many businesses I start to work with still manually input their sales and purchase ledger or detailed general journal transactions. With most accounts packages (even the smaller ones) having the ability to import transactions from spreadsheets or directly from another system, there is very little need to spend hours on manual inputting directly into your system.
Some of the reasons/excuses businesses don’t import their transactions:
- No one knows how to do the imports. Once a template has been established, most imports are very simple to do and require minimal training.
- They believe it’s quicker to input directly as they don’t need to look up the accounts seperately. Very simple formulae in a spreadsheet could help with this. It’s easier to see from a spreadsheet whether the totals are correct and reduces the time taken to drill down into multiple screens on each transaction.
- By the time they’ve set up the template, they could’ve input it already. This is usually true of the first time but when staff members get used to processing this way, they are able to get a handle on it’s further potential uses and like anything, the time taken to do this reduces.
There are many reasons why I believe businesses should consider importing their transactions, here are some:
- Most transactions within accounts are repetative on a daily, monthly or quarterly basis. By having import templates ready to edit not only acts as a checklist of which entries are needed but will (after the initial set up) save time and improve accuracy of the data.
- Having information on a spreadsheet allows quicker reviews and clarity on what’s being input without the need to ‘drill down’ into the transactions.
- Importing saves manual processing time allowing staff to do more value added activities. By having more detailed information in your accounts system it vastly improves the information you’re able to then get out of it for management reporting and budgeting.
- The quality of data will improve as you’re likely to have more fields completed if you import due to the copy/paste function within spreadsheets and having all fields on one line rather than different screens.
- The accuracy of the data improves due to the ability to set up checks within the template file that let you know if something is incorrect. Transposition errors are less likely.
- If you link your accounts system to another database e.g. CRM system or Project Management software, then it can remove duplication of the data entry. A lot of accounts systems now allow you to import or link directly to your banking software which is a huge benefit as often bank reconciliations can be done daily which helps monitor cashflow.
Some examples of what can be set up to import (system dependent) and be of value to your business:
- Detailed payroll journals (by department) – Payroll is often the largest cost to a business yet often the one most overlooked in terms of reporting. You can improve a potentially complicated journal by setting up a template to import to a higher level of detail.
- Bank Statement Imports – By importing your bank statements from the data downloaded from your online banking, you eradicate the all too common transposition errors or possible duplication if you have multiple transactions of the same value. Some accounts software now has the facility of ‘bank feeds’ which imports transactions directly for you on a daily basis e.g. Xero.
- Sales invoicing especially when periodic – For example one of my clients was a group of private schools which had complicated discount structure based on age of each child and sibling discounts. This processing went from several weeks of manual inputting each term (with a high chance of errors and lots of disputes/complaints) down to 3 hours and a far greater level of accuracy. Checks were put in place on the import preparation spreadsheet to ensure that family invoices were grouped together and that all children had been accounted for and the correct discounts applied.
- Prepayments & other month end general ledger journals – Full descriptions on each line with each value seperated and not grouped together. This provides clearer transactional analysis and helps greatly when it comes to budgetting and cashflow forecasting.
- Customer/Supplier Records – updating or adding. If you have a lot of fields to complete often they’re omited with manual entry, by using a spreadsheet to complete the data it is likely to contain more consistent information as you can copy/paste or fill down on certain fields.
- Budgets – Depending on your reporting software, this could streamline your management pack by utilising functionality already available in the system without the needfor further processing in spreadsheets.
If you’re still not convinced of the value to your business by utilising data imports, consider this:
Saving just 1 day of processing time per month for a £25k employee is a saving of approximately £1,580pa* to your business. Use the ‘saved’ time on producing more timely, informative management information and KPIs (which you can now get as the transactional level data is of better quality).
Better business information leads to better business decisions and ultimately to better business profits.
If you’d like to discuss your accounts system and how to better utilise it’s functionality including imports, please contact Kat Hipsey, kat@hipseyconsulting.com
*Taking into account ER NI/Pension.
Doctor help my Travel Expense has been disallowed
On the 16th December 2013 Dr Samad Samadian v HMRC had his appeal on Travel heard by The honourable Mr Justice Sales and it was decided to uphold the previous decision of the First Tier Tribunal.
After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.
So in summary:
- Home to Hospitals – Disallowed
- Hospital to Hospital – Disallowed as Business Expenses (but could be allowed against Employment)
- Visits to Patients – Allowed
Now would be a good time to check your tavel mileage claims to makesure they are valid.
steve@bicknells.net
10 creative ways to cut your overheads
Making a profit and generating cash is vital to all businesses and a key way to improve profit is to reduce overheads, here are a few ideas:
- Re-think your office/premises requirements – Premises are big cost for most businesses, could you operate in a smaller space and sub-let part of your offices? could you work from home?
- Telecommute – Technology effectively reduces distance, so there is no need to require administrative people or specialists to be physically located together. Use VOIP, Skype and Video Conferencing.
- Cars – Company Cars can be expensive, time consuming to manage and emotive, why not consider car allowances
- Staff – Generally the biggest overhead is people, consider outsourcing rather than having the fixed overhead of in house staff
- Shop around – Are you getting the best deals on Stationery, Printing, Insurance, Light & Heat…..
- Students – Students, apprentices and interns are eager to learn and will be less expensive then experienced employees
- Refinance Debt – Could you reduce the cost of borrowing? could you borrow from your Self Invested Pension Plan?
- Paper – Sorting, filing, and finding files requires time and space. Purchase a scanner and scan all important papers and keep them in well organised electronic files to save space and administrative costs.
- Go Green – Reducing waste and saving energy will save money too
- Buy Second Hand – Second hand office furniture is plentiful and its cheaper than buying new
steve@bicknells.net
Self Employed Tax Allowances
Basically when you are self employed you spend money on 3 types of expense:
1. Capital Expenditure – Equipment & Vehicles
2. Business Expenditure – stock, wages, premises
3. Private Expenditure – day to day living expenses – mostly not allowed but some types of cost may still count as business expenses
In general its types 1 and 3 where sole traders and partnerships miss out on tax allowances.
For example, you could claim capital allowances on your car, if you use your car partly for private and partly for business you simply disallow a % for private use.
On other assets there is an Annual Investment Allowance which is currently £250,000 per year from January 2013.
For most business that will cover all their capital expenditure, but there are further allowances available too.
With regard to private expenditure, there are tax reliefs available for working from home
http://www.hmrc.gov.uk/incometax/relief-household.htm
If you have to spend money on tools or specialist clothing for your job you may be entitled to either:
- tax relief for the actual amounts you spend
- a ‘flat rate deduction’
http://www.hmrc.gov.uk/manuals/eimanual/eim32712.htm
steve@bicknells.net
What can you include in a PAYE Settlement Agreement (PSA P626)?
PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.
Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).
The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:
Benefits of £5,000 x 40 per cent = £2,000 tax
Grossed-up tax = £2,000 x 100/100-40 = £3,333.33
Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99
Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32
Minor Benefits
- incentive awards
- reimbursement of late night taxi fares outside s248 ITEPA 2003
- personal incidental expenses in excess of the statutory daily limit
- present for an employee in hospital
- staff entertainment, for example a ticket for Wimbledon
- use of a pool car where the conditions for tax exemption are not satisfied
- subscriptions to gyms, sports clubs etc
- telephone bills
- gift vouchers and small gifts
Irregular Expenses
HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.
- relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
- occasional attendance at an overseas conference where not all the expenses qualify for relief
- expenses of a spouse occasionally accompanying an employee abroad
- occasional use of a company holiday flat
- one off gifts which are not minor.
Impracticable Items
HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item
- free chiropody care
- hairdressing services
- Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
- cost of shared taxis home which do not satisfy s248 ITEPA 2003
- shared cars.
Gov.uk has guidance on How to get a PSA
steve@bicknells.net
12 really quick and easy tax tips for PAYE workers
- Child care vouchers – if you have children attending a nursery or looked after by a professional childminder, your employer can join a Childcare voucher scheme. This allows for £55 of the weekly cost to be deducted free of tax and NI if you are a basic tax rate payer, or £28 if you are a higher rate tax payer.
- Pensions – if you pay into a work pension scheme, 20% tax is automatically deducted. For high rate tax payers, you can claim additional relief either by declaring it on your Self-Assessment or calling the taxman.
- Company cars – are a pain and the tax is huge BUT if you have a company van, the benefit in kind is capped at £3,000 so for a basic rate tax payer the cost of driving is only £600 or £1,200 for a higher rate payer.
- Professional membership fees – your membership to a recognised trade or professional body it is a deductible expense, but not for your hobbies.
- Share incentive schemes – there are loads of schemes that allow either NI or Capital Gains Tax to be saved, you don’t have work for a listed company either.
- Giving your work colleagues a lift to work – if your employer encourages car pooling you can claim 5p a mile for the passenger without incurring any additional tax charge.
- Cycle to work – get your employer to provides a bike both for travel to work and play, it’s not considered as a benefit in kind.
- Then after a time you can buy it off them at market value.
- Season ticket loans – your company can advance the cost of an annual season ticket up to £5,000, much cheaper than buying a ticket weekly.
- From April 2014 this increases to £10,000 (not really sure if that’s a blessing?)
- Electric Cars – from April 2015 there’s no benefit in kind.
- Working from home – it is becoming increasingly more common for staff to work from home. You can claim £4 a week allowance without having to produce receipts.
Any questions contact the author at niall@odfinancialservices.co.uk
Will I be taxed on Christmas gifts recieved at work?
It’s Christmas and even though times are tough, you could still get a gift from your employer or client or supplier, will it come with a tax bill attached?
The answer depends on the value.
HMRC Helpsheet 207 – Non-taxable payments or benefits for employees
The Helpsheet says, certain gifts from third parties are non-taxable if all these conditions are satisfied:
• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and
• the person making the gift is not your employer or a person connected with your employer, and
• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular services which are to be performed, and
• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and
• the gift cost the donor £250 or less, and
• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.
http://www.hmrc.gov.uk/helpsheets/hs207.pdf
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).
http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm
Will the employer or supplier or client have to account for VAT?
You do not have to account for VAT on business gifts made to the same person so long as the total cost of all the gifts does not exceed £50, excluding VAT, in any 12-month period. To check this it is acceptable for you to adopt any 12-month period that includes the day on which the gift is made.
But where the following apply:
- the total cost of business gifts given to the same person in any 12-month period exceeds £50
- you were entitled to claim the VAT on the purchase as input tax
you must normally account for output tax on the total cost value of all the gifts. How to work out the cost is explained in Notice 700, ‘The VAT Guide’.
steve@bicknells.net
Will the Christmas Party be tax free?
The answer is probably! maybe?
HMRC have an Exemption (not an allowance) of £150.
If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, we do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable (see examples at EIM21691).
The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:
- themselves and
- any members of their family and household who attend as guests.
The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm
Things to watch out for:
1. The function must be open to all staff, if its just directors, its taxable
2. The cost must not exceed £150 per head, otherwise it will all be taxable http://www.companychristmas.co.uk/news/tax_free_christmas_parties
3. If you have several events during the year you may have to choose which ones qualify if the total exceeds £150
steve@bicknells.net
Business Accountant 