Corporate Entertaining and VAT Recovery
Q: I am completing my VAT return and I am not sure if I can claim the VAT back on the hampers sent to some customers and hiring a corporate box at the Boxing Day football match we attended with some customers.
A: If gifts to individuals do not total more than £50 in a 12 month period then the VAT can be reclaimed on the expenses incurred.
However, there is an exception to this which is that VAT cannot be reclaimed on items that are classed as alcohol tobacco and food. Therefore it is unlikely that you will be able to reclaim the VAT on the hampers.
With regard to the costs relating to the hire of the corporate box at the football match, you are not able to reclaim any input VAT as the costs will be considered to be entertaining which is specifically blocked. If you have employees there as guests rather than hosts then you will be able to reclaim their proportion of the VAT.
Relocation Packages from Employers
Q: My firm are expanding their business and I have been offered a job in another area of the country to set up a new division with my current employer. It means that I will have to move house and they have offered to pay my relocation expenses but I am concerned that this will be taxed. As I am a higher rate taxpayer it may not be worth my while?
A: Whether or not the amount is taxed depends on what your new employer is actually paying you for. The salary increase will obviously be taxed at your current tax rate, but where employers provide employees with financial assistance when they have to move home to take up a new job, an amount up to £8,000 can be paid tax free to meets these allowable costs.
The HM Revenue & Customs do specify that the assistance provided must meet the costs of relocation, and this includes paying the fees connected with house sale and purchase, meeting the cost of travel to the new location for house hunting trips and paying for the costs of moving household furniture and effects.
They can also meeting the costs of a bridging loan where the relocation takes place before you sell your old home. To qualify as tax free, the relocation expenses must be incurred, or the relocation benefits provided, before the end of the tax year following the one in which you start your new job.
However, some costs which are not treated as tax free include compensation paid for any loss on sale of the employee's home, interest payments for the mortgage on the employee's existing home, re-direction of mail, and Council Tax bills incurred on your old home.
Use of a Company Van
Q: I have been offered the use of a company van by my new employers. I don’t use the vehicle privately but they are letting me take the van home after work and to get to the site in the morning. Will I have to pay any tax on this?
A: Employees will only pay tax on a company van that is made available to them if they actually use it for private journeys other than commuting. Previously, employees still incurred a benefit in kind charge if they received any form of private use of the company van, including home to work travel.
If you receive unrestricted private use of the vehicle, you are assessed on a PAYE benefit in kind totalling £3,000, with an additional fuel scale charge of £500 if your employer pays for private fuel. This could mean that from the 2009/10 tax year, a basic rate taxpayer who has private use of a van with company fuel will pay tax of £700 for the privilege. Private use other than commuting can be defined as using the van to do the supermarket shopping or using the van for social activities outside of work.
Therefore, as you only receive use of your van for home to work travel, your employer should ask you to sign an agreement stating you are permitted to use the van for ordinary commuting from home to your place of work, but all other private use is strictly prohibited. You must also ensure you keep mileage logs recording the reason for the journey and the number of business miles travelled in case there is an enquiry by HM Revenue & Customs.
Obviously, the tax charge for private use of a van is substantial for employees who, unlike you, use the vehicle for more than just commuting, so it is important your employer has all of the above procedures in place before the start of the new tax year to avoid an unwanted tax charge for their employees.
Lloyd Stubbs specialises in managing tax and accountancy affairs for small business owners and can be contacted by phone or email
Tel: 01476 590555
Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.