EMPLOYED OR SELF EMPLOYED?
A key part of the CIS is that the contractor has to make a monthly declaration that they have considered the status of the subcontractors and are satisfied that none of those listed on the return are employees.
HMRC can impose a penalty of up to £3,000 if contractors negligently or deliberately provide incorrect information. Remember that employment status is not a matter of choice. The circumstances of the engagement determine how it is treated.close to 5 million globally.
THE TESTS WHICH ARE APPLIED
The right of control over how, what, where and when the work is done; the more control that a contractor can exercise, the more likely it is that the worker is an employee.
Whether the worker provides a personal service or whether a substitute could be provided to do that work.
Whether any equipment is necessary to do the job, and if so, who provides it.
The basis of payment – whether an hourly/weekly rate is paid, whether there is any overtime, sick or holiday pay and whether or not invoices are raised for the work done.
Whether the worker is part and parcel of the organisation or whether they are conducting a task which is self-contained in its own right.
What the intention of the parties is – whether there is any written statement that there is no intention of an employment relationship.
Whether there is a mutuality of obligation; that is, an ongoing understanding that the contractor will offer work and the worker accept it.
Whether the workers have any financial risk.
HMRC have developed software called the employment status indicator tool, which is available on their website.
HMRC COMPLIANCE CHECKS
Tax compliance checks by HMRC aren’t necessarily bad news for your business. Although a tax inspection is often triggered by a discrepancy in your figures, they can also be carried out completely at random. With increasing pressure to close the multi-million pound tax gap, HMRC tax investigations and enquiries are becoming increasingly common.
A HMRC inspection will usually be initiated with a straightforward request to provide information and documents so that a tax payer’s tax liability can be properly assessed. We have extensive investigations experience and understand this can be a difficult and stressful time. We can guide you through his process and help you get back to achieving your original goals.
Motoring costs, like other costs incurred which are wholly and exclusively for the purposes of the trade are tax deductible but the timing of any relief varies considerably according to the type of expenditure. In particular, there is a fundamental distinction between capital costs and ongoing running costs.
PURCHASE OF VEHICLES
Where vehicles are purchased outright, the accounting treatment is to capitalise the asset and to write off the cost over the useful business life as a deduction against profits. This is known as depreciation.
The same treatment applies to vehicles financed through hire purchase with the equivalent of the cash price being treated as a capital purchase at the start with the addition of a deduction from profit for the finance charge as it arises. However, the tax relief position depends primarily on the type of vehicle, and the date of expenditure. A tax distinction is made for all businesses between a normal car and other forms of commercial vehicles including vans, lorries and some specialist forms of car such as a driving school car or taxi.
Vehicles which are not classed as cars are eligible for the Annual Investment Allowance (AIA) for expenditure incurred. The AIA provides a 100% deduction for the cost of plant and machinery purchased by a business up to an annual limit. The amount of AIA available varies depending on the period of the accounts. The current amount of AIA is £200,000 and prior to 1 January 2016 was £500,000. Where purchases exceed the AIA, a writing down allowance (WDA) is due on any excess in the same period. The WDA available is currently at a rate of 18% or 8% depending on the asset. Cars are not eligible for the AIA, so will only benefit from WDA.
THE GREEN CAR
Cars generally only attract the WDA but there is one exception to this and that is where a business purchases a new car with low emissions – a so called ‘green’ car. Such purchases attract a 100% allowance to encourage businesses to purchase cars which are more environmentally friendly. From April 2015 a 100% write off is only available where the CO2 emissions of the car do not exceed 75 gm/km (reducing to 50gm/km from April 2018). The cost of the car is irrelevant and the allowance is available to all types of business.