Are you ready for 2014?

Are you ready for 2014?

As well as the recent Autumn Statement providing advisers and clients with much food for thought, there are a number of other ‘house-keeping’ tax matters to consider as 2014 begins:

1. Employers NIC overhaul

  • As part of the Budget 2013, a measure was announced which will enable all employers to get a little something back from the Government
  • From April 2014, businesses will be able receive a £2,000 ‘employment allowance’ against Employers NIC’s
  • This allowance will be administrated automatically through normal payroll procedures via Real Time Information (RTI)

The measure, that is said to be worth £1.75bn to UK employers, will apply to any business which employs staff via PAYE.

This measure could completely remove the Employer’s NIC burden for many very small businesses. For example, an employer could take on one employee on a salary of up to £22,400 or up to four full time adults on the National Minimum Wage, without paying any Employer’s NI at all.

In addition to this, the Chancellor announced recently during his Autumn Statement that from 6 April 2015, employers who employ staff under the age of 21 will not be liable for Employer’s NIC’s. This is where qualifying staff earn up to the Upper Earning Limit (currently £797 per week). Once earnings for qualifying staff exceed this level, the exemption will be removed.

2. Changes to reclaiming VAT on fuel

Changes are being made to the way in which VAT on fuel can be reclaimed by businesses, where they pay for fuel on behalf of their employees. These changes will apply for VAT return periods starting on or after 1 February 2014.

Currently, where businesses pay for fuel on behalf of their employees, they can choose from one of the following methods to account for VAT on the fuel:
  1. Fuel scale charge
  2. No VAT claim
  3. Actual VAT incurred - by keeping mileage records

From February 2014 onwards, the fuel scale rate will be removed and the default position will be to reclaim VAT on fuel on an ‘actual’ basis. This means that, where there is private use of a vehicle, full mileage records will need to be kept if the business wants to reclaim the VAT on the business fuel. Without a record of the corresponding business mileage against which to calculate the VAT claim, no VAT can be reclaimed.

For companies, this can be avoided where the directors/employees pay for their own fuel and reclaim their business mileage at the HMRC approved rates. These remain to be 45p for first 10,000 miles and 25p per mile thereafter.

Unfortunately, under the new rules, sole traders and business partners cannot use the approved mileage rates and therefore will either have to keep mileage records or not reclaim VAT on their business fuel.

If you would like more information or would like to discuss your tax affairs in general, please contact our Tax Partner, Chris Barrington on the details below:

Chris Barrington

telephone: 01942 292505