As from 6 April 2007, the provision of a business van to an employee for business and private purposes will give an increased benefit in kind charge of £3,000 (previously £500). In addition, a further benefit in kind charge of £500 is incurred should fuel also be provided for personal use. (Please note that the taking home of the van at night does not constitute private use but any further personal mileage could.)
If you are currently subject to the £500 benefit charge the Inland Revenue assumes that from 6 April 2007 you will automatically become liable to the higher charges referred to above. Accordingly, if you intend to stop using a business van for private mileage you should notify us, or the Inland Revenue directly, before the 2007/2008 employee tax codes are prepared in January 2007.
Please be advised that on enquiry, the Inland Revenue will expect to see evidence that vans are not being used for personal purposes. In many cases, this can simply be achieved by ensuring the employee’s contract of employment prohibits private use. Nonetheless, mileage records will still need to be maintained.
For all those operating in the construction industry there is a new scheme coming into operation from 6 April 2007. The Inland Revenue are currently forwarding information to all contractors regarding the subcontractors they are currently using.
Amongst other well documented changes, the new scheme will require the completion of a form every month. The form is required to be completed and submitted in the two-week period from the 5th to the 19th of the month. What has not been well publicised is that there will be a penalty of £100 levied for every single month (or part thereof) that each form is late.
Although there will be a grace period for a few months before the penalty regime commences it is imperative that all contractors get to understand both the form and their responsibilities under the new scheme as quickly as possible.
Payroll and dividend administration
As already stated in our June 2005 and June 2006 newsletter the Inland Revenue has been looking closely at the dividend and payroll operations in many organisations. In a number of cases they have successfully collected additional tax, interest and penalties; mainly arising as a result of poor administration and bookkeeping practices. There is now a further development in that there is a new Act (The Fraud Act 2006) designed to catch individuals and businesses ‘engaging in time travel’ to make documents appear to have been agreed and/or signed at some earlier date than was actually the case.
1) In order to comply with the dividend regulations:-
a) any dividend decided upon must be agreed to in a meeting of directors before payment and minuted accordingly
b) a dividend warrant must be prepared at the time of payment duly signed by a director or the company secretary
c) payment must be made from the company bank account for the amount stated on the voucher and correctly noted as a dividend at that time
There is no opportunity for the director(s) to decide what was and was not a dividend payment in the year following a review of the profits thereafter.
2) In order to comply with the payroll regulations:-
a) all staff except directors must be paid at an amount equal to or in excess of the minimum wage
b) a weekly or monthly payslip must be produced showing the correct tax and NIC falling due
c) the amount paid to the member of staff in the week or month must be in agreement with the net amount shown on the payslip