The end of the tax year. Ashdown Hurrey updates us!
3rd April 2019
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Today, 5th April, sees the end of the 2018/2019 tax year - are you up to speed with the tax implications for the year end? What about the changes in legislation that come into force when the new tax year begins?

Ashdown Hurrey have highlighted some of the most important ones here:

Making Tax Digital

The deadline for businesses with a turnover above the VAT threshold to keep digital records for VAT purposes using Making Tax Digital (MTD), is here. If your business has a turnover that's above the VAT threshold (currently £85,000) then for your VAT return that starts on or after 1 April 2019, you will need to:

  • keep your records digitally (for VAT purposes only), and
  • submit your VAT return information to HMRC through MTD functional compatible software.

You will need to set you business up for MTD for VAT so that you a re able to submit your VAT returns digitally. HMRC recently clarified that businesses that pay VAT by Direct Debit cannot sign up in the 7 working days leading up to, or during the 5 working days after sending a VAT Return.

Penalties eased over the coming year

HMRC has stated that they will be approach the digital record keeping with a lighter touch during the first year, filing penalties if businesses have demonstrated they are making every effort to comply with the law. This isn't however to be misconstrued as a blanket 'no penalties promise' and businesses must work hard to do their best to adhere to the MTD requirements.

Any business that is currently exempt from online filing of VAT will remain so under MTD , and businesses will be not be forced to go digital for their VAT returns if they are unable to. Those who struggle to adapt to the new service due to age, disability, location or religion will be provided for in terms of being able to apply for an exemption.

You are not currently mandated to use the MTD for VAT service if your business has a turnover under the VAT registration threshold. However you are able opt in if you wish.

VAT grouping

Two or more corporate bodies are allowed to be treated as a single taxable person for VAT purposes known as a VAT group under special VAT rules.

Advantages of group registration

  • The representative member accounts for any tax due on supplies made by the group to third parties outside the group. This is particularly helpful if your accounting is centralised.
  • As the group is treated as a single taxable person, you do not normally account for VAT on goods or services supplied between group members.
  • Only one VAT return is required for the whole group.

Disadvantages of group registration

  • You will need to make sure that the representative member has all the necessary information to submit a VAT return for the group by the due date.
  • All members of the group are jointly and severally liable for the tax due from the representative member.
  • The partial exemption de minimis limits apply to the group as a whole and not the members individually.
  • The limit for voluntary disclosures of errors on past returns also applies to the group as a whole.
  • The cash accounting limits apply to the group as a whole and not to the members individually.
  • The payment on account limits will apply to the group as a whole and not to the members individually.

HMRC has recently updated the applicable VAT Notice 700/2: group and divisional registration. The notice cancels and replaces the previous version published in August 2014 and has been updated to reflect changes coming into effect on 1 April 2019 that clarify which overseas services can be classified as bought-in services to ensure that such services are subject to UK VAT.

Repay your employer for private fuel

Where an employee with a company car is provided with fuel for their own private use by their employers, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car, applied to a fixed amount, currently £23,400. For example, a vehicle with a CO2 rating of 150g/km would create a taxable benefit of £7,254. The car fuel benefit charge will increase to £24,100 for the 2019-20 tax year.

Crunch the numbers - which is lower, tax on the benefit or repay private fuel used?

The car fuel benefit charge is not applicable when the employee pays for all their private fuel, this includes commuting to and from work. Employees should keep a log of private mileage and can then use the published advisory fuel rates to repay the cost of fuel used for private travel back to their employer. In this case, HMRC will accept that there is no car fuel benefit charge and the employee will save the Income Tax charge on the private car fuel benefit. It will usually be much cheaper to repay your employer for private fuel rather than to pay the Income Tax charge especially if private mileage is relatively low.

The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly. However, the use of the advisory fuel rates is not binding if the employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile. There is also a lower advisory rate if the company car is fully electric.

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