Tax Guru
Moray-Life

This feature is sponsored by: TaxAssist Elgin

Writing exclusively for Moray Life, Elgin-based tax and accountancy specialist Andrew Richardson gives advice on financial matters to small businesses.

If you have a tax query then please submit your questions directly to Moray-Life using this form and Andrew will try to give you a response on this page next month.

 
 

Tax Guru 07-2013

Hello again!

My name is Andrew Richardson and I have been running TaxAssist Accountants in Elgin for five years. I am hoping that this tax advice section will become an interactive feature. Submit your tax and accountancy questions to Moray Life and I’ll answer a sample of them each month, along with a brief summary of the tax issues we should be looking out for.

Q: I have a VAT registered business and I'm about to replace my car. Do I have to charge VAT on the sale of the old car?

A: The general rule is that you only charge VAT on the sale of a car if you recovered VAT on the original purchase. Most businesses are not able to recover the VAT on cars, the main exceptions being:

  • Stock for a motor manufacturer or dealer
  • Going to be used as a taxi, driving instruction vehicle or self-drive hire car
  • Will be used exclusively for business purposes (such as pool cars under certain conditions)

You may have purchased the vehicle from a private individual or non-VAT registered business, in which case you won't have been charge any VAT on the purchase. In this scenario, you probably only need to charge VAT on any profit you make on the sale (i.e. the difference between the sales price and the original purchase price) but there are some criteria to adhere to in order to apply this. In reality, most cars are sold at a loss and if this is the case, then no VAT would arise in this scenario - again, subject to certain criteria being met.

VAT and motor-related transactions are a complex area as there are specific rules that do not apply to any other instances. It may be best to speak to an accountant before acting to make sure that you don't make any mistakes or are left out of pocket.

Q: My employer has changed my tax code and it doesn't look right. I've already told them but they just say that HMRC told them to change it. What should I do?

A: HMRC issues your tax code based on information they have about you and it tells employers and pension providers how much Income Tax to deduct from payments.

I'm afraid that your employer cannot simply change your tax code at the request of an employee, even if the tax code is incorrect. You will need to contact HMRC on their Taxes Helpline to tell them your tax code is wrong and have them send out the correct code.

The Taxes Helpline is: 0300 200 3300 (available 8am-8pm Monday to Friday, 8am-4pm on Saturdays)

You'll need your national insurance number when you contact them. This can be found on your wage slip or P60. If HMRC agree that your code should be changed, they will contact your employer. The process can take a few weeks to complete.

Q: I hoping to offer private medical insurance for my staff before the end of this summer, but I want to make sure that there won't be any tax surprises. Is there anything I need to be aware of before I go ahead?

A: For employees (who are not directors) earning less than £8,500 per year (this includes the value of the insurance) there will be no reporting requirements, tax or national insurance contributions to pay.

For company directors and any employee earning more than £8,500:

  • Their share of the cost of the policy must be reported on form P11D
  • The employer needs to pay Class 1A NICs on the values reported
  • The individual is subject to a tax charge on the value reported on form P11D

The total value of all employee benefits for the tax year must be reported annually on form P11D(b) which must be filed with HMRC by the 6th of July and any Class 1A National Insurance must be paid by the 19th of July. Late P11D(b)s will be subject to penalties.

One little bit of good news is that the expenditure is usually tax-deductible for the company.

 

If you have a tax query then please submit your questions to Moray Life and I'll try to give a response next month.  And always remember...

'Tax complexity itself is a kind of tax.'

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.