Cars for Employees tax advice

Taxing employers on employee cars is intended to encourage manufacturers and businesses to choose a more fuel-efficient and environmentally friendly vehicle.

Business cars are taxed in reference with the list price of the car but graduate in accordance with the level of its carbon dioxide emissions.

Diesel cars emit less carbon dioxide than petrol cars and so are currently taxed on a lower percentage of the list price than an equivalent petrol car. Diesel cars do, however, emit greater quantities of air pollutants than petrol cars and are therefore a supplement of 3% of the list price generally applies to diesel cars.

The Vehicle Certification Agency produces a free guide to fuel consumption and emission figures for all new cards. Available via http://carfueldata.direct.gov.uk/

 

Imported cars

Imported cars that are registered after 1998 have no approved Carbon dioxide figure. They are taxed according to engine size.

 

Tax on private fuel

Further tax is applied when the company car user is supplied with or allowed to claim reimbursement for fuel for private journeys.

 

Business fuel
There is no additional charge where the employee is solely reimbursed for fuel for business travel.

 

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Non-resident who owns a rental property in Canada

It is all too easy to get lost in the complexities of Canadian Tax. This article is offers our expert Canadian tax knowledge in regards to non-resident who own a renal property in Canada.

 

Like in all countries worldwide, it is essential to be aware of all of your tax filing obligations, important due dates and other surrounding tax issues.  In Canada, the tenant or property manager has an obligation to withhold non-resident tax at a rate of 25% on gross rental income paid to a non-resident. This tax should be paid to the Canada Revenue Agency (CRA) on or before the 15th day of the month following the month the rental income is paid. Each year, the taxpayer must produce a NR4 slip thatbreaks down the gross amount of rental income along side the amount remitted to the CRA.

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Tax relief for employees

There are several expenses that you are able to claim against tax as an employee. Every year we help thousands of taxpayers save thousands by claiming expenses that they weren’t previously aware of.

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Get a US Personal Tax Extension

As an American Taxpayer you can request a six-month extension to file your taxes.

What form do you need to request an extension?

In order to receive an automatic extension, you must file a Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) with the IRS.

A Form 4868 can be filed electronically or by paper mail. You will have to provide your Social Security Number (SSN) on the form along side your spouse’s SSN (if you are filing jointly). You will also be asked to provide an estimate of your total tax liability and the amount of taxes you have already paid.

A Filing Extension does not extend the time you have to pay your taxes.

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How do I calculate my charitable tax credits?

In order to calculate your charitable tax credit you must determine the elegible amount of your charitable donations. Once you have determined whether your donations are eligible or not, you must work out the total amount of donations you wish to claim. In any one year, you can claim:

  • Donations made by December 31 of the applicable tax year;
  • Any unclaimed donations made in the previous five years; and
  • Any unclaimed donations made by your spouse or common law partner in the year or in the previous five years.

You are able to claim eligible amounts of gifts up to 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you are able to claim up to 100% of you net income.

Tax Savings

Charity tax credit is a non-refundable tax credit. It can only be used to reduce tax owed, if you do not owe any tax, you do not get a refund. Generally your tax savings will equal the amount of charitable tax calculated.

 

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Canadian tax for small businesses

If you are a Canadian resident there are several steps you must take to start a business legitimately. For income tax purposes, a business is defined as activity where there is a reasonable expectation of profit and there is evidence to support that intention. For goods and services tax/ harmonized sales tax purposes, a business can also include activities that are not engaged for profit, as well as any regular and continuous activity that involves leasing property.

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Canadian Student studying abroad taxes

If you’re a Canadian resident studying outside of Canada the Canada Revenue Agency (CRA) offer university students a number of credits and deductions. It is likely that you will have additional obligations and filing requirements both in Canada and abroad, so it vital that you are fully aware of your status as a tax filer.

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Dividend Nil-Rate

In April 2016, a tax-free dividend allowance replaced the dividend tax credit. This meant that tax doesn’t have to be paid on the first £5,000 of dividend income a person receives. The headline rates of dividend tax also were changed.

Tax charged on dividend received over £5,000 is currently (02/06/2017):

·      7.5% on dividend income within the basic rate band

·      32.5% on dividend income within the higher rate band

·      38.1% on dividend income within the additional rate band

The new, simpler system means that only those with significant dividend income are subject to higher tax.

The Dividend Allowance does not reduce the total income for tax purposes, and dividends within the set allowance are still counted towards the appropriate basic or higher rate tax bands.

On 6th April 2018 the Dividend allowance will be reduced to £2,000

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Payroll- Basic Procedure

If you wish to set up a PAYE scheme with the HMRC you must contact the New Employer’s Helpline (0300 200 3211) or register online (GOV.UK).

As the employer, you are responsible for operating PAYE and calculating the appropriate National Insurance Contributions (NICs). There are also certain statutory payments that must be paid from time to time, such as:

·      Statutory sick pay (SSP)

·      Ordinary statutory paternity pay (OSPP)

·      Statutory maternity pay (SMP)

Information regarding the operation of PAYE is available from the official GOV.UK website: www.gov.uk/business-tax/paye

Real time payroll

Employers, or their agents, will normally have to make a regular online payroll submission for each pay period during the year. This will detail all payments and deductions made from employees on or before the date they are paid to the employees.

More information on real time payroll can be found at www.gov.uk/paye-for-employers

National Insurance Contributions

NIC is payable by the employee and the employer on the employee’s gross pay for a particular tax week or month and is calculated on a non-cumulative basis. 

When does tax and NIC have to be paid to the HMRC?

Tax and NIC should be paid to the HMRC by the 19th of the month following the payment. Tax month run from the 6th to the 5th of each month.

Any employee that pays electronically can take advantage of the cleared electronic payment date of the 22nd rather than the 19th.

Employers whose average monthly payments do not exceed £1,500 are able to pay quarterly rather than monthly.

 

Forms you must complete:

·      P11 Deductions working sheet

·      P60 End of year summary

·      P45 Details of employee leaving

·      Starter Checklist

 

If you fail to meet PAYE regulations you can face penalties. Contact us now for payroll support.

 

Forming a limited company

It is possible to set up a limited company independently, however it is advised that a specialist formation agent is used in order to avoid unnecessary mistakes and obstacles

You must first decide on the following:

·      Is you company going to be private or public limited by shares, or a private company limited by guarantee

·      What the purpose of the company is and its capital requirements

·      Whether the proposed company name is available and acceptable

A Form IN01 is used to apply to form a company. This is to be accompanied by a Memorandum of Association, the articles and the correct registration fee.

The Memorandum of Association serves the purpose of evidencing the intention of each subscriber to form a company and become member of that company.

Companies that wish to incorporate as limited by shares must present a statement of capital and initial shareholdings along side the other documents.

 

Directors

All companies must appoint at least one director, whom must be a natural person aged 16 years or over. For each director, the following information must be provided:

·      Full forename and surname

·      Any former names used for business purposes

·      Full service address including town, county and postcode

·      Usual residential address

·      Country/State of residence

·      Date of Birth

·      Nationality

·      Occupation

·      The number of shares, if any, the director is to have in the company

·      Security items from the criteria required by Companies House

 

Shareholders

For each shareholder the following information must be provided:

·      Full forename

·      Surname

·      Full address including town, county and postcode

·      The number of shares the shareholder is to have in the company

 

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How long should you keep tax books and records?

There is different legislation around different types of records and therefore there are varying periods of time your expected to keep individual records. You must be aware of the varying periods so not to face unneeded scrutiny and penalties from the HMRC.

VAT

VAT records must be kept for at least six years unless the HMRC allows a shorter period. You can request a shorter period by offering a full explanation that justifies why keeping the VAT records is impractical.

PAYE

The HMRC recommends that PAYE records be kept for at least three years after the income tax year to which they relate.

Company records

Corporation tax self-assessment and accounting records must be held for at least six years from the end of the accounting period.

There are no specific requirements for statutory books, however the Companies Act states that an entry relating to a former member of the company may be removed from the Register of Members 10 years from the day the individual stopped being a member of the organisation.

Government Grants

Any documents that relate to Government grants must be kept generally for at least four years. Any documents relating to gift aid must not be destroyed before consulting the relevant Government department.

Employers’ liability policy certificates

Previously there has been a requirement to keep Employers liability policies for at least 40 years. However, this has been replaced with guidance. Employers must be conscious that their liability for illness and injury at work does the cease when the policy expires. Records should be retained to ensure that future claims are supported and met.

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The Tax implications of a Husband and Wife owned business

The HMRC monitor businesses owned by spouses closely, in an effort to stop business partnership where one spouse is considerably less active and exists as a partner as a means to divert income and save tax.

The settlements legislation is the regulatory document that acts as a way to limit against tax avoidance. Contractors trading in a limited company that want to share company ownership and income with a non-fee-earning partner, family member or friend is at risk of inspection from the HMRC, which can lead to penalties.

Following a the House of Lords ruling against the HMRC in the Artic Systems case, the HMRC cannot apply settlements legislation to arrangements between spouses. As long as the shares involved are ordinary class shares a fee-earning contractor can jointly own a limited company with their non-fee-earning spouse or civil partner, and split the income from ordinary shares.

However, the Arctic System case did not provide an exemption for contractors seeking to split share ownership and income with a non-spouse, i.e. partner, family member or friend. In order to limit against the HMRC claiming foul play and enforcing penalties on shares an income that has been ‘settled’, the income must be justified on commercial grounds.

Investment/Share purchase

A non-earning spouse can make an investment and buy shares in the contracting business at a market rate. This can be a good option for businesses that expect to grow beyond a single fee-earning contractor. However, there is a risk of limited to no financial net benefit for the non-fee owner.

 

Justifying the share split and income

A non-fee earner is not non-working. Many companies rely heavily on non-fee earners to do vital jobs like send out invoices and handle banking. Therefore, if the non-fee earner has a definite role in company it is possible that the HMRC will view a split shares and income as justified.

Contractors must be aware of a number of factors that could flag their income/share split as tax avoidance.

·      Complex share structures with multiple classes of shares. The HMRC will question any shares that are not ordinary.

·      Using dividend wavers to shift the fee-earner dividend payment to a spouse.

·      Failing to complete and file paperwork. All shared and dividends must be supported by paperwork. If they are not, the HMRC can reclassify the payments as earning, not dividends, resulting in more taxes and penalties to pay.

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