Note that where employers reimburse their employees 45p per mile for using their own cars they are able to reclaim input VAT based on the amounts shown in the table.
In the case of a 1600cc diesel car that would be 1.5 pence per mile. (9p x 20/120). Such a claim needs to be supported by a receipt from the filling station.
These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 September 2016. Where there has been a change the previous rate is shown in brackets.
Engine Size Petrol Diesel LPG
1400cc or less
10p 7p
1600cc or less
9p (8p)
1401cc to 2000cc
13p (12p) 9p (8p)
1601 to 2000cc
10p
Over 2000cc
20p (19p) 12p (11p) 13p
You can continue to use the previous rates for up to 1 month from the date the new rates apply.
The latest Finance Act has retained the 28% CGT rate for sales of residential property, whereas the general rate was reduced to 20% for higher rate taxpayers.
It has been suggested that it is possible to reduce the rate from 28% to 20% by deferring the gain temporarily into qualifying EIS company shares.
The tax planning opportunity arises because reinvesting the property gain in Enterprise Investment Scheme (EIS) company shares defers the gain until the shares are sold when the gain comes back into charge at the general rate of CGT, currently 20% for a higher rate taxpayer.
There is no minimum holding period for EIS deferral relief, however where the investor is seeking income tax relief and CGT exemption on the sale of the shares they need to be an unconnected investor and retain the EIS shares for at least 3 years.
The reinvestment in EIS shares must take place during the period of 12 months before to 36 months after the date of disposal of the property.
Shares in EIS qualifying companies are risky investments and specialist investment advice should be taken. There is also a chance that HMRC may block this tax planning strategy in the future.
The Government and HMRC remain committed to the “Making Tax Digital” project with more information being sent online to HM Revenue and Customs (HMRC) by employers, pension funds, banks and other institutions.
The next big step will be the introduction of quarterly reporting of income and expenditure by businesses and landlords from 2018. HMRC are currently consulting on a number of proposals to make radical changes to facilitate the introduction of the new regime. We accountants have serious concerns about the timescale; HMRC say “you will not need an accountant to fill out the information on the new system.” They are expecting businesses to use new Apps on their Smart phones and Tablets to transmit their data to HMRC.
OVERVIEW OF MAIN PROPOSALS
Small businesses and landlords will be encouraged to prepare their accounts on a cash basis with the threshold for using the basis significantly increased.
The current basis period rules for unincorporated businesses to be reformed.
A new voluntary Pay As You Go (PAYG) system to be introduced to help businesses budget for their tax payments.
EXTENDING THE CASH BASIS
About 1 million small businesses currently prepare their accounts on a cash basis. The present threshold for using the cash basis is the VAT registration limit £83,000 and HMRC are consulting on the limit being significantly increased, possibly double the VAT threshold of £166,000, the current limit for leaving the scheme.
WHAT IS THE CASH BASIS?
The current cash basis for preparing accounts was introduced as a simplification measure from 6 April 2013. Using the cash basis means that businesses merely need to calculate their profits based on receipts and payments.
There are no adjustments at the end of each period for accrued expenses and amounts prepaid, and no adjustment for stock or bad debts at the end of the period.
Another simplification is that the cost of equipment bought for the business, except for motor cars, can be deducted directly in arriving at the profit without the need for a capital allowances claim. One disadvantage of the current cash basis rules is that interest on money borrowed to finance the business is limited to £500 a year and a similar restriction is likely to be incorporated into the new rules.
PROPOSALS TO SIMPLIFY BASIS PERIODS
The current basis period rules are complex, and many unincorporated business owners find them difficult to comprehend. Where the business makes up accounts to a date other than 5 April the accounts and profits have to be made to “fit” into the tax year. There are particular problems at the commencement of trading as some of the initial profits are taxed twice and the “overlap” profits are then deducted on cessation.
One proposal is for businesses to prepare accounts for a period that aligns with the tax year (6 April – 5 April) or even prepare accounts for shorter periods such as each quarter to align with their VAT quarters and submissions to HMRC.
PAY AS YOU GO
Another complication of the current self-assessment regime is that where tax has not been collected under PAYE or at source, primarily on self-employed profits and rental income, the taxpayer is required to make payments on account.
These payments on account are due on 31 January and 31 July based on 50% of the outstanding liability for the previous tax year with a balancing payment the following 31 January.
This can make budgeting cash flow for the self-employed and landlords difficult for some to manage.
The government is proposing to introduce a new voluntary Pay as You Go (PAYG) system for the self-employed and landlords to make payments towards their income tax, national insurance and VAT liabilities monthly with a reconciliation at the end of the year.
Many of these proposals may have significant implications for your business. We will update you on further details once we see the outcome of the various consultations. We can then discuss how we can assist you with your quarterly obligations.
You can apply to HMRC for a VAT refund on building materials and services if you are building a new home, or converting a property into a home. In order to qualify the home must be separate and self-contained, be for you or your family to live or holiday in, and not be for business purposes (although you can use one room as a work from home office). Builders working on new buildings should zero rate their work anyway and you won’t pay any VAT on their services.
Where there is an existing dwelling on the site you will normally need to demolish the existing building, however it will count as a new build where a single façade is retained if that is a condition of the planning consent. You may also claim a refund for builders’ work on a conversion of non-residential building into a home, or a residential building that hasn’t been lived in for at least 10 years.
When you make your claim you must supply a copy of the planning permission, a full set of building plans, the invoices – including tenders or estimations if the invoice isn’t itemised, and proof the building work is finished. Please contact us if you need advice or assistance on this or any other VAT matters.
Employer Tax Returns
Month ended 30/4/16 – Pay and file on ROS by 23/5/16
VAT Returns
Bi Monthly Returns to 30/4/16 – pay and file on ROS by 23/5/16.
If you have an April year end, file your Return of Trading details by 23/5/16.
RCT Returns
RCT monthly return and payment for April 2016 – pay and file by 23/5/16. Note a €100 fine applies to late returns.
Corporation Tax Returns and Payments
In May consider:
Companies with an August 2015 year end – file return and pay balance of tax on 23/5/16.
Companies with a June 2016 year end – Pay preliminary tax by 23/5/16
Remember, preliminary tax must generally equal the lower of 100% of last year’s liability or 90% of current year expected liability.
We previously highlighted that a new Tax Appeals Commission would take over the management and processing of tax appeals in early 2016. As the Revenue Commissioners and the new Commission have updated guidance on this very important matter, we now summarise some useful points below which will hopefully assist practitioners in this area.
New appeals
With effect from 21 March 2016, all new appeals will be made to the new Tax Appeals Commission (TAC) using a specific detailed form available on their website. Quite a lot of detail is required including, in particular, the amount of tax the grounds for appeal and the issues arising. It is important to note that anything NOT cited in the appeal application may not necessarily be admitted later by the Commission when the appeal is heard.
It is therefore advisable to include as much detail as possible and to include a copy of the relevant assessments and a signed Agent authorisation. The standard 30 day time limit applies as heretofore and again similar to the previous regime late appeals are possible though on an exceptional basis only.
The most important aspect of the appeal application is the section dealing with how a taxpayer wants the appeal to be heard. The new default rules are that appeals will be held in public unless a taxpayer opts for a hearing of all, or part of their case, in private.
On receipt of an appeal notice, the TAC will forward this to Revenue who will have 30 days to consider whether they object to its validity. If they do so object the tax payers only avenue of recourse is to seek a High Court judicial review of the Commissioners decision.
Existing appeals
Where an appeal was in existence on 21 March 2016 but had not yet been referred to the new Commission, Revenue have a statutory obligation to do so as soon as possible. Before doing so however Revenue is required to notify the appellant that they intend to refer it to the Commission and to request that the appellant indicates whether he or she wishes to settle the appeal by agreement or to have it referred to the Commission instead.
This potentially allows for a window of opportunity for all “in progress” appeals to be discussed within a defined time window. Recent Revenue guidance suggests that Revenue will be writing to all taxpayers with appeals in progress on 21 March 2016, to ascertain if they wish to enter into dialogue with a view to settling cases before they proceed to the Commission. The taxpayer will have 30 days in which to respond and then a further 90 days will be allowed in which a potential settlement can be discussed.
At the time of writing it is anticipated that any unsettled cases will be transmitted to the Commission by the end of September 2016.
Circuit Court
Under the previous appeal system a taxpayer who was unhappy with the outcome of an appeal could request a full rehearing in the Circuit Court. This is no longer available except in the case of appeals where at least an initial hearing had taken place before the Appeal Commissioners by 21 March 2016.
Summary
It can be seen that there are significant changes to the operation of appeals, not only in procedures, but also in substance in terms of the initial details to be supplied. The default legal basis is that in future, they will be heard in public instead of in private unless a taxpayer indicates otherwise.
Employer Tax Returns
Month ended 31/3/16 – Pay and file on ROS by 23/4/16
VAT Returns
Bi Monthly Returns to 29/2/16 – pay and file date was 23/3/16.
Therefore if not filed already, early contact with the Collector General is a necessity to avoid unwanted demand. If you have a March year end, file your Return of Trading details by 23/4/16.
RCT Returns
RCT monthly return and payment for March 2016 – pay and file by 23/4/16. Note a €100 fine applies to late returns.
Corporation Tax Returns and payments
In April consider:
Companies with a July 2015 year end – file return and pay balance of tax on 23/4/16.
Companies with a May 2016 year end – Pay preliminary tax by 23/4/16
Remember, preliminary tax must generally equal the lower of 100% of last year’s liability or 90% of current year expected liability.
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In previous briefings we have highlighted the fact that Revenue have increasingly used the Tax/E briefing facility to advise practitioners and indeed the general public on their views on how tax law and practice should be implemented. This mode of communication has also been used to clarify certain technical matters an example of which is set out below.
Revenue have updated their Guide recently and it is worthwhile highlighting some matters of interest:
Nursing home expenses
Unlike all other qualifying medical expenses, nursing home expenses incurred by a taxpayer may be claimed at his/her marginal tax rate. The full cost incurred by a third party of maintaining an individual in a nursing home may be allowed where the claimant has actually incurred the cost and has not been reimbursed directly or indirectly by the nursing home resident.
It is irrelevant as to whether or not the nursing home resident has income in their own right BUT any reimbursement they actually make to the claimant is netted off in calculating the claim arising.
In cases where the resident pays some of their nursing home costs from own income and a third party pays some costs there can be issues in identifying exactly what proportion of costs are actually paid towards nursing home care by each party. This updated Revenue briefing confirms the long standing practice that in such cases the resident will be regarded as paying 60% of his/her income towards their maintenance with the balance then claimable by the other party.
Where a patient has availed of support under the nursing home support scheme the position is as follows:
Other useful points
Insurance/compensation for injury incurred
Where a specific award for personal injury is granted against specific vouched medical expenses no tax relief will be granted. However it can be the case that a lump sum to cover future potential medical expenses may also be awarded. In such cases any actual expense subsequently incurred will be generally regarded as coming from current income and tax relief will still be available.
Health care outside the State
The costs of such health care may also be claimed in certain circumstances once the practitioner is entitled under the laws of that overseas country to practice there. This will include the cost of maintenance in a hospital or nursing home etc and may also include the reasonable travel and accommodation costs of an accompanying person.
Specific medical conditions
Costs associated with specific conditions such as special foods for coeliac or diabetic patients may also qualify for tax relief under the heading of medical expenses but unfortunately current tax law does NOT allow for tax relief on additional educational type costs incurred for children with autism or dyslexia.
Medical equipment
The updated Guide also contains helpful assistance as to the type of costs incurred on medical equipment which may qualify for tax relief. For example where medical evidence shows that a computer is necessary to alleviate communication problems of a severely incapacitated person the cost may be allowed.