Table of contents. Chapter 1 - Directors and employees. Chapter 2 - Travel expenses. Introduction Table of contents

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1 Table of contents Introduction Chapter 1 - Directors and employees 1.1. What is the position for employers? Are business travel expense payments taxable? Is there different tax treatment between directors and employees? What is lower-paid employment? Is tax relief due on travel expenses? What is a dispensation? What can dispensations cover? Can dispensations apply to all directors? What checks and procedures are required? Do you have to reimburse all your employees travel costs? What costs make up travel? Can you reclaim VAT paid on travel expenses? Getting the most out of a business trip Can you claim tax relief on a luxury business trip? Is combining business with pleasure tax efficient? Is there a special meaning of incidental for tax purposes? What about business travel expenses incurred on a private trip? What is the employer s position? Chapter 2 - Travel expenses 2.1. Introduction What journeys qualify for tax relief? What is a business journey for tax purposes? What are the commuting rules? Commuting: not allowed Commuting: allowed Commuting oddities: journeys to depots, bases and sales patches What is triangular travel? What about travel to training courses? I

2 2.7. Homeworking When is home treated as a workplace? More than one workplace? When is home not treated as a workplace? What are the rules for personal service companies? Are there exceptions to the home-to-work travel rules? Late night travel Can extra tax relief be claimed for car sharing? What if the passenger misses their lift? Are there special rules for disabled workers? Are there special rules for overseas travel? Are there tax breaks for works transport and bus services? What if public transport is disrupted? The travel rules in summary Chapter 3 - Travelling and working abroad 3.1. Introduction Is travel tax deductible if your job is based abroad? What are the rules for travel between overseas employments? What are the rules for UK employees travelling abroad on business? When can you claim a tax deduction for travel for your family? What are the special rules for non-domiciled directors and employees? Chapter 4 - Scale payments and allowances 4.1. What are scale rate payments? What are HMRC s subsistence scale rates? Breakfast rate Late evening meal rate One-meal (five-hour) rate Two-meal (ten-hour) rate No excessive claims! Overnight subsistence rate Staying with friends and family rate Lorry drivers What are the scale payments for incidental overnight costs? Can you agree your own scale rates? Setting scale rate payments Agreeing scale rates Providing a sample Increasing the rates II

3 4.5. Are there special rules for foreign accommodation and subsistence? Are there any situations when the rates do not apply? What if you want to pay higher rates? Can the employee use the benchmark rates to claim a deduction? HMRC s mileage rates What is the approved mileage allowance payments (AMAPs) scheme? What if you pay more than the approved rate? What if you pay less than the approved rate? Do the rates also apply for NI contributions? Advisory fuel rates for company car drivers What are company car drivers advisory fuel scale rates? Company car drivers rates from 1 September What is the VAT position on scale rates and authorised mileage allowances? Do you need to tell HMRC you are using benchmark or scale rates? What records do you need to keep if you pay scale rates? Exemptions and allowances for parking and bicycles Tax-free parking at or near work Tax-free bicycles - loan of bicycles and equipment Gift of bicycle to an employee: benefit in kind Bicycles: shower, changing and parking Bicycles: mileage allowances Chapter 5 - Company cars 5.1. Introduction When is a company car chargeable to tax? Are there any tax-free perks that can be included with a company car? How is the amount of the car benefit tax charge calculated? Who is taxed on car benefit? How do you work out if they re a P11D employee? Can a lower-paid employee ever be taxed on car or car fuel benefits? Cars provided to the employee s family Lower paid employees: employing the family Does a tax charge apply if someone other than the employer supplies a car? Transfer of part ownership III

4 5.5. What is a car for tax purposes? Definition of a car for PAYE and NI If you modify a car will the tax treatment be different? Why modify a car? Double-cab pick-up: car or van? Is there a special rule for recreational vehicles (RVs) and motor homes? What is private use of a vehicle? How can you ensure HMRC accepts there s no private use? In summary: private use What is the tax treatment of pooled cars? Car benefit: how to calculate the tax charge Step 1: manufacturer s list price What if you can t find a published list price? Step 2: add optional accessories What doesn t count as an accessory? Step 3: deduct capital contributions No price cap for expensive cars Step 4: the appropriate percentage Rules for different fuels Older cars and cars with no CO 2 emissions figures Step 5: reduction for periods when the car is unavailable Shared cars Step 6: contribution for private use How is the car benefit calculated on classic cars? Are there special car benefit rules for disabled drivers? What is the tax treatment of replacement cars? Ex-employees Chapter 6 - Private motoring - car fuel 6.1. What are the tax charges for providing fuel for private motoring in a company car? Making good the cost of private fuel Is free fuel worth the cost? What are the alternatives to free fuel? IV

5 Chapter 7 - VAT 7.1. Public transport Is VAT reclaimable on passenger transport costs? Are all taxi etc. fares subject to standard-rate VAT? Is VAT charged on other services provided as part of public transport? What is a car for VAT purposes? Can input VAT be reclaimed on the purchase of a car? When will HMRC accept that a car is exclusively for business use? What is the procedure for reclaiming VAT on the cost of a car? What if you adapt the vehicle so that it s no longer a car? What if you modify your commercial vehicle? What about cars bought as company cars for employees? What does HMRC consider as private use for VAT purposes? Are there such things as pool cars for VAT? What is the definition of a business journey for VAT purposes? What happens if you subsequently make private use of a car on which the input VAT has been reclaimed? Are there special VAT rules for leased cars? What is the cost of a new or second- hand car for VAT purposes? Can VAT be reclaimed on vans and other vehicles? How much VAT can be reclaimed on maintenance and repair costs? Can VAT be reclaimed on the cost of a personalised number plate? What are the rules for VAT on fuel used for private mileage? Mileage payments and VAT How are payments for business mileage affected by VAT? How do you work out the fuel element of a mileage payment? What records are needed to reclaim VAT on fuel? Chapter 8 - Vans 8.1. Is there a tax advantage to driving a van? What is a van for tax purposes? What is the taxable benefit in kind for the personal use of a van? What is the tax charge? What counts as business travel? V

6 8.6. When can a van be provided tax free? When is private use insignificant? What is the restricted private use condition? What counts as a pool van? What is the position regarding electric vans? Is the charge reduced if the van is unavailable? What is the position if a van is shared? Is the charge reduced if the employee makes payments for private use? Is there a further charge on a replacement van? Is there a charge on fuel for private journeys? Is there a tax-free approved mileage allowance for vans? What are the tax rules for occasional van hire? Chapter 9 - Self-employed 9.1. Introduction How is tax relief given on the cost of a vehicle used for business? What travel expenses are allowable for tax? More than one business purpose? Place of work Does working from home make a difference? When can you treat your home as a workplace? Where is the base of your business operations? Place of work case studies Milkman Barrister - Newsom v Robertson Dentist - Sargent v Barnes Building subcontractor - Horton v Young Doctor - Dr Samadian Proportion of expenses What associated costs of travel are allowable for tax? Can you claim a proportion of your travel expenses? Expenses on food and drink Is the cost of overnight accommodation allowable? How should disallowed travel expenses be reported? How do you calculate tax deductible motor expenses? Claiming actual costs Simplified expenses Is there a different tax treatment for cars, vans and other vehicles? What is the tax treatment of a double-cab pick-up? Is there a different tax rule for motorcycles? What can be claimed if you use a bicycle for work? VI

7 9.13. Can you claim that your vehicle is used 100% for business purposes? Can you reclaim input VAT on the purchase cost of a car? What if you use your vehicle to advertise your business? Can tax relief be claimed for motoring fines, etc.? Are the congestion charges treated as tax allowable? Why is extra care needed in calculating motoring expenses? Chapter 10 - Capital allowances Introduction What are capital allowances? What are the basic rules? Are cars included in an expenditure pool? What is a car for capital allowances purposes? What is the cost of a car for capital allowances? How do pools apply to cars bought on or after 1 April 2009? The special rate pool The main rate pool The single asset pool Low emissions cars How does the 100% allowance work for low emissions cars? How does the special rate pool work? How does the main car pool work? How are capital allowances calculated for unincorporated businesses? Are pooling rules good or bad for tax? Can you create a single asset pool? Unincorporated businesses (sole traders and partnerships) Incorporated businesses (limited companies) How do pools apply to cars bought before 1 April 2009? Main pool Single asset pool Private use pool (unincorporated businesses only) What allowances are there for commercial vehicles? Are vans plant and machinery? What is a van for capital allowances purposes? What is the cost of a commercial vehicle for capital allowances? What s the annual investment allowance? Do all businesses qualify for the AIA? What happens when you sell a vehicle? Does the AIA apply to vehicles that are leased out? VII

8 Writing down allowances What is the rate of writing down allowances? Small plant and machinery pool write-off Can you claim balancing allowances when you reorganise your company? What are short-life assets? How do you make a short-life asset election? Are classic cars long-life assets? Interaction between capital allowances and simplified expenses system? Can employees claim capital allowances if they use their own cars for business? Chapter 11 - Vehicle leasing Are there special tax rules for leasing vehicles? Which vehicles are affected? Which types of car lease are affected? When is the deduction for rental payments restricted? Is tax relief allowed in the year the lease payment is made? Are there different rules for payments under maintenance contracts? How are lease payments affected by VAT? Should you lease or purchase? Chapter 12 - Motorcycles and other forms of transport What is the tax treatment of motorcycles? Are any other vehicles covered by the same rule as motorcycles? How are motorcycles and other vehicles taxed? What if the vehicle is used for business purposes? Can you claim the costs of the vehicle against tax? What if the employee uses their own motorcycle for business journeys? Does the simplifed expenses system apply to motorcycles? VIII

9 Chapter 13 - National Insurance Introduction What does NI apply to? How much is payable in respect of company cars? Will you receive tax relief on Class 1A contributions? What is the NI position on travel expenses? NI trap for employees But how can HMRC prove the procedure wasn t followed? Chapter 14 - Tax planning and saving Tax planning for cars - introduction What makes a company car tax efficient for employees? Is using a privately owned car for business more cost efficient than a company car? Is fuel for private mileage in a company car a worthwhile benefit? What is the cost of a company car for employers? Are there tax advantages to the car leasing rules? How is this restriction worked out? How much tax can you save with low emissions cars? Cost of a car Zero emissions cars What is a dividend in kind? What is the procedure for paying a dividend using an asset? What is the tax position if you sell your car to the company? How does this scheme work? What s in it for you? Other savings with low CO 2 cars Chapter 15 - Appendices Appendix 1 - Emissions table Appendix 2 - Fuel scale charges for VAT Appendix 3 - Company cars - advisory fuel rates Appendix 4 - Vehicle excise duties Appendix 5 - Approved mileage allowance payments IX

10 Chapter 16 - Documents Business mileage record Clause for employee car policy Incidental overnight expenses policy Lump sum contribution agreement Memo: invoices for motor expenses Pool car journey record Pool car policy Pool car status letter Private fuel agreement Prohibition for private use clause Rules for private use letter Scale rate clearance letter Top-up payments agreement Use of van agreement X