HMRC OFFICIAL RATE OF INTEREST ONLY 2.25%
HMRC have announced that the official rate of interest will increase from 2% to 2.25% on 6 April 2023. The official rate of interest is used to calculate the income tax charge on the benefit of employment related loans and the taxable benefit of some employment related living accommodation. These rates used to fluctuate in line with the base rate, but in recent years HMRC has fixed the rate for the whole tax year.
For those employers including beneficial loans on form P11d for 2022/23 the average official rate to be used is 2%. The charge applies where the amount of the loan exceeds £10,000.
So the question would be, should directors and shareholders take advantage of this lower rate?
The HMRC rate of interest on beneficial loans looks very attractive compared to the Bank of England Base rate of 4.5% and much higher rates charged by banks for unsecured loans.
Note that where loans are made to participators (broadly shareholders) of a close company there is potentially a special tax charge on the company on any loan still outstanding 9 months after the end of the accounting period. The charge is currently 33.75%, the same as the higher rate of tax on dividend income. This tax charge is only repaid to the company when the loan is repaid or written off.
EXCESS MILEAGE PAYMENTS
Petrol and diesel pump prices are high and the tax-free mileage rates payable to employees who use their own vehicles for business, haven’t been adjusted for over a decade.
For cars and vans, the first 10,000 miles per year is reimbursed at 45p per mile. Above 10,000 miles per year it is 25p a mile. For motorcycles, all mileage is reimbursed at 24p a mile.
Many employees cannot afford to use their own car or motorbike for business journeys when being reimbursed at these rates, so some employers pay more. It must therefore be noted that any excess above the tax-free rate is taxable and subject to National Insurance Contributions (NICs).
If you have paid your employees at rates that are higher than the current HMRC mileage rates, then you must treat the excess amounts as extra salary and put them through payroll.
Where an employee has an electric car, HMRC mileage rates still apply for business journeys, tax and NIC free. If an employee charges their private car at an electric charging point, at work, for free, then there is no taxable benefit for the employee on using that electricity. Things can get more complicated if you reimburse your employee for the cost of charging their private electric car at their home, or at a road-side charging point.
VAT MARGIN SCHEME FOR CAR DEALERS
Brexit has introduced a VAT border between Great Britain and Northern Ireland, the implications of which are still being worked through.
Since 1 May 2023, all second-hand vehicles purchased in Great Britain and then sold in Northern Ireland have to carry VAT on the full selling price. Before this date, motor traders could use the second-hand margin scheme under which VAT is charged only on the margin on sales value added by the car dealer.
To compensate these dealers, HMRC has introduced a second-hand motor vehicle payment scheme, which allows businesses to claim a VAT-related payment if they are either:
- VAT- registered in the UK and have a business establishment in the UK
- Buy an eligible second-hand vehicle in Great Britain and move the vehicle with the intention to resell it in Northern Ireland or the EU.
Traders can make use of the margin scheme for any eligible motor vehicles purchased in Great Britain and moved to Northern Ireland before 1 May 2023. If these vehicles are still in stock on 1 May 2023, they must be sold by 31 October 2023 to remain eligible for the VAT margin scheme.
NEARLY £9 BILLION IN OLD BANKNOTES & COINS NOT CASHED IN
The Bank of England (BoE) has revealed that almost £9 billion in old coins and banknotes has not yet been cashed in with 111 million £5 notes, 65 million £10 notes, 198 million £20 notes and 70 million £50 notes still in circulation. It said that coins and notes that are no longer legal tender can be deposited or exchanged.
The Royal Mint also confirmed that around 87 million old design £1 coins have still not been returned. It revealed that 1.6 billion have been returned, but 1.8 million of these were counterfeit coins. It is urging individuals with old design £1 coins to deposit them at banks and the Post Office.
Whilst the use of cash as a form of payment has fallen in popularity, it is still the second most common way to pay after debit cards: according to data published by trade association UK Finance, cash accounted for 15% of all payments last year.
FANTASY FOOTBALL MANAGER OF THE SEASON
As the Premier League came to a close last month, so did our Fantasy Football Manager of the Season competition. After an incredibly close season, we are delighted to announce that the Fletcher Thompson Fantasy Football League Manager of The Season is James Donnelly! We would like to thank all of our clients, friends and colleagues who took part. We hope you enjoyed it as much as we did.
DIARY OF MAIN TAX EVENTS JUNE/JULY 2023
|PAYE & NIC deductions, and CIS return and tax, for month to 5/06/23 (due 22/06 if you pay electronically)
|Corporation tax payment for year to 30/9/22 (unless quarterly instalments apply)
|Last date for agreeing PAYE settlement agreements for 2022/23 employee benefits
|Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2022/23
|Deadline for forms P11D and P11D(b) for 2022/23 tax year. Also, the deadline for notifying HMRC of shares and options awarded to employees.
|PAYE & NIC deductions, and CIS return and tax, for month to 5/07/23 (due 22/07/23 if you pay electronically)
|50% payment on account of 2023/24 tax liability due.