Newsletter July 2019

Changes in Advisory Fuel rates from 1 June 2019

HM Revenue & Customs (HMRC) has changed the advisory fuel rates for company cars with effect from 1 June 2019, but for one month from the date of change, employers may use either the previous or new current rates, as they choose. HMRC review these rates quarterly on 1 December, 1 March, 1 June and 1 September.

HMRC accept these rates for the reclaim of VAT on the fuel element of mileage rates paid to employees, though employers will need to retain the necessary VAT receipts with the VAT thereon at least covering the VAT reclaimed.

The new rates are set out in below and apply to all journeys on or after 1 June 2019:

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

These rates are not relevant to:

• Employers who make mileage payments to employees who use their own car for business journeys.

The HMRC Authorized Mileage Allowance Payments for such business journeys are 45p per mile for the first 10,000 miles in a tax year and 25p per mile thereafter. So long as the rate per mile paid to employees is less than these amounts, the payments are tax and NI free.

Building and Construction – VAT changes coming!

The government has published a final version of the draft legislation, in the form of a statutory instrument, which will introduce a VAT domestic reverse charge for building and construction services with effect from 1 October 2019. The government announced its intention to introduce a domestic reverse charge in Autumn Budget 2017 in response to organised criminal attacks on the VAT system in the construction sector.

The domestic reverse charge will only affect supplies at the standard or reduced rates where payments are required to be reported through the Construction Industry Scheme (CIS).

Therefore, supplies between sub-contractors and contractors, as defined by CIS, will be subject to the reverse charge unless they are supplied to a contractor who is an end user. End users will usually be recipients who use the building or construction services for themselves, rather than sell the services on as part of their business of providing building or construction services.

More details are available here:

https://www.gov.uk/government/publications/vat-reverse-charge-for-building-and-construction-services-guidance-note/guidance-note

Reporting benefits to HMRC

By law, at the end of each tax year you must give HMRC details of any expenses payments, benefits and facilities you have given to each of your employees or directors. You must also include any expenses payments, benefits or facilities provided to members of the director’s or employee’s family or household.

These are reported on form P11D and a Class 1A National Insurance charge has to be paid by the company at 13.8% of the benefit value and reported on a P11D(b) form. A P11D has to be given to your employees by 6 July following the end of the tax year.

There are more details here.

https://www.gov.uk/employer-reporting-expenses-benefits/reporting-and-paying

https://www.gov.uk/guidance/how-to-complete-forms-p11d-and-p11db

This can be a particularly complex area and we will be pleased to assist you in calculating the benefits and submitting the forms on your behalf. There are penalties for incorrect returns!

VAT and Do it Yourself house builders

VAT for most work on houses and flats by builders and similar trades like plumbers, plasterers and carpenters is charged at the standard rate of 20% – but there are some exceptions.

The builder may not have to charge VAT on some types of work if it meets certain conditions, including:

• building a new house or flat
• work for disabled peoplein their home

For work to be zero-rated for VAT, it must qualify as a genuinely new, self-contained house or flat. This means:

• it’s self-contained – there are not any internal doors or connections to other houses or flats
• it can be used independently of any other property, including businesses
• it can be sold on its own
• it has proper planning permission
• any existing buildings on the site have been demolished completely to ground level (unless you’re extending an existing building to create a new house or flat)

Those reclaiming VAT under the DIY Housebuilders scheme will often find they have been charged 20% VAT incorrectly by a builder. HMRC will not repay this VAT and it is then necessary to go back to the builder to try to obtain a refund of the VAT charged incorrectly.

If you are a DIY Housebuilder – challenge the bills! It will save you hassle in the long term and help your cash flow in the short term!