IS IT A VAN OR IS IT A CAR?
When it comes to payrolling company vehicles, the answer might not be as obvious as you think. HMRC's view of what constitutes a "van" can be quite different to your view. Make sure you know the rules as incorrect payrolling of company vehicles can lead to HMRC backdating missed BIK charges, costing both the employer and the employee a lot in unexpected tax.
Check out a recent tax ruling against Coca Cola which saw two similar vans treated completely differently for BIK purposes, showing just how complex the system can be to navigate:
THERE'S A LOT MORE TO PAYROLL THAN JUST PROCESSING PAYROLL
Here we'll try to share some useful payrolling information with you*
*For information only. These posts are designed to give a quick overview of a subject and do not include all of the necessary and exhaustive information required to make an informed decision. Tax regulations change constantly. Therefore, we cannot be held liable for inaccurate or out of date information or for decisions made by clients or non-clients without consulting us. It is your responsibility as an employer to ensure you are correctly accounting for payroll taxes and submitting the relevant information to the necessary legal bodies. For complete, accurate & up to date information please contact us.
PLANNING A STAFF PARTY?
Make sure it qualifies as a tax-free benefit for your employees.
It needs to meet the following conditions:
1) The total cost must not exceed £150 per head, per year.
2) £150 includes VAT and any extra costs such as transport and accommodation.
3) The £150 is a limit and not an allowance: if the cost is over £150, the whole benefit is taxable.
4) The event must be primarily for entertaining staff.
5) The event must be open to all staff (in that location/branch).
6) The event is not just to be for directors, unless all your staff are directors.
ARE YOU DIRECTOR OF MORE THAN ONE COMPANY?
Many directors take a small tax efficient salary from their company. But if you're taking salaries from companies which are related, it may not be as tax efficient as you think. You don't get a national insurance allowance for each directorship when companies are related. As an alternative to salary or dividends, benefits in kind can sometimes be a tax-efficient option for directors of multiple companies. Speak to us for more information.
COMPANY CAR BIK RATES
From April 2020, the government is reducing the BIK rates on many hyrbid & electric cars to as low as 2%. This means if you get a company car for personal use as well as business, the tax charges will be substantially reduced if you choose the right car. Directors and employers who provide company cars to their employees should start planning now to make the most of this huge tax saving.
TAX EFFICIENT BONUSES & GIFTS
You don't have to pay tax or NI on employee (and director) benefits if they meet the following conditions:
1) Cost £50 or less
2) Not cash (or a cash exchangeable voucher)
3) Not a reward for their work or performance
4) Not in the terms of their contract
This is known as a "trivial benefit" and doesn't incur tax or national insurance charges. Directors of companies with 5 or less shareholders are limited to £300 a year of trivial benefits. There is no limit for employees.
EMPLOYEE BENEFITS IN KIND
If you’re an employer and provide expenses or benefits to employees or directors, you might need to tell HMRC and pay tax and National Insurance on them. This would include things like company cars, health insurance, travel & entertainment expenses & childcare to name a few. But there are some expenses that are exempt. One example is mobile phones provided to employees that are used for both business and personal use.
These are exempt provided they fit the following criteria:
1) The phone contract is arranged by the company with the supplier
2) The company pays the supplier directly (not through the employee)
3) You only provide the employee with only the 1 mobile phone or SIM card
4) It's not part of a salary sacrifice arrangement