Approved mileage rates for personal cars

From 2011-12

First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Cars and vans 45p 25p
Motor cycles 24p 24p
Bicycles 20p 20p

Company cars – advisory fuel rates from 1 June 2013

These rates apply to all journeys on or after 1 June 2013 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

Engine size Petrol LPG
1400cc or less 15p 10p
1401cc to 2000cc 17p 12p
Over 2000cc 25p 18p
Engine size Diesel
1600cc or less 12p
1601cc to 2000cc 14p
Over 2000cc 18p

 

Directors’ loan accounts and Corporation Tax explained

If you’re a company director or ‘participator’ and take money out of your company that’s not a salary or a dividend – over and above any money you’ve put in – you’re classed as having received the benefit of a director’s loan.

If your director’s loan account is overdrawn, your company must pay tax on any amount you’ve not repaid by nine months after the end of your Corporation Tax accounting period.

If you’re a company director (or other participator of a close company) and take money out of the business over and above any money you’ve put in, and that money is not a salary, dividend or reimbursement for a business expense, then the money is not yours – it belongs to the company. You’ve received the benefit of a director’s loan from your ‘director’s loan account’.

You lend money to your company: director’s loan account in credit

If you lend your company money (for example by paying money into your company’s bank account as opposed to, say, buying shares) your director’s loan account is in credit.

You can draw some or all of this money out at any time. There are no tax implications for your Company Tax Return.

Your company lends money to you: director’s loan account in debit or overdrawn

If you take money out of your company’s bank account over and above money you’ve loaned to the company – and that money is not a salary or a dividend – then it’s a loan from the company to you. Your director’s loan account is overdrawn.

What income do I exclude from my flat rate turnover for VAT?

You exclude from your flat rate turnover:

  • private income, for example income from shares
  • bank interest
  • the proceeds from the sale of goods you own but which have not been used in your business
  • non-business income and any supplies outside the scope of UK VAT, and
  • sales of capital expenditure goods on which you have claimed input tax

What do I include in my Flat Rate Turnover for VAT?

Your flat rate turnover is all the supplies your business makes, including VAT. This means all of the following:

  • the VAT inclusive sales and takings for standard rate, zero rate and reduced rate supplies
  • the value of exempt income, such as any rent or lottery commission
  • supplies of capital expenditure goods, unless they are supplies on which VAT has to be calculated outside the flat rate scheme
  • the value of any despatches to other Member States of the EC if you are making intra EC supplies

Note: as exempt and zero rate supplies are included in your flat rate turnover you apply the flat rate percentage to the exempt and zero rate turnover. You may pay more VAT by being on the scheme if these supplies are a larger proportion of your business turnover than the average for your trade sector.

Vat deadlines

Deadlines for submitting your VAT Return

You must submit your return so that HMRC receives it by the due date.

This deadline is shown on your online return and is normally one calendar month and seven days after the end of your VAT period.

Vat period ending

Deadline for online submission

31 January 2013 7 March 2013
28 February 2013 7 April 2013
31 March 2013 7 May 2013
30 April 2013 7 June 2013
31 May 2013 7 July 2013
30 June 2013 7 August 2013
31 July 2013 7 September 2013
31 August 2013 7 October 2013
30 September 2013 7 November 2013
31 October 2013 7 December 2013
30 November 2013 7 January 2014
31 December 2013 7 February 2014

 

Deadlines for paying your VAT

If you pay by online Direct Debit, HMRC will collect payment from your nominated bank account a further three bank working days after the due date for your return. This means that online VAT Direct Debit offers you more time to pay than any other method.

Claims to reduce or cancel self-assessment payments on account

The payments on account required for any tax year are calculated by reference to the tax liability for the preceding year.  For those taxpayers whose tax liability is relatively constant from year to year this method of calculation ensures that the payments on account required approximate to the additional tax required over and above any tax deducted at source during the year.

However, it is always possible that a taxpayer’s circumstances change significantly from one year to the next.  In such circumstances, it is possible that the payments on account, as originally calculated, eventually result in a net over-payment of tax for the year.

In order to avoid over-payments of tax a taxpayer may make a claim to reduce or cancel the payments on account.  Claims are required to ensure that HMRC does not commence recovery proceedings to enforce payment for tax that will have to be repaid at the balancing payment date.

Due dates for self-assessment payments on account

Whenever payments on account are required for any tax year they are payable without demand:

  • The first on or before 31 January of that tax year
  • The second on or before 31 July next following that tax year

Use of own home – allowable expenses

Allowable expenses you can claim tax relief against when using your own home for businesses purposes.

Fixed costs

Some costs relate to the whole house and have to be paid even if there is no business use. These include costs such as, Council Tax, mortgage interest, insurance, water rates, general repairs and rent.

If part of the home is set aside solely for business use for a specific period then a part of these costs is allowable. It will normally be appropriate to apportion these expenses by area and time. Some particular points are considered below.

Insurance

If the business use is covered by a separate policy then the cost of that policy is allowed in full, with no part of the household policy being allowed.

Otherwise, an appropriate part of the premium can be allowed.

Council Tax

The council tax is a tax on property. In principle it may be allowable in those instances where other property based expenses are deductible. If business use is established the appropriate proportion of the tax may be allowed under the normal rules for the deduction of expenses.

Mortgage interest

If part of the home is used solely for business then an appropriate part of the mortgage interest is an allowable deduction. Repayments of capital are not allowable.

Rent

Part of the rent is an allowable expense when the home is rented and part is used solely for business purposes.

A sole trader cannot charge a separate rent to his or her own business. This is because individuals cannot rent property to themselves. The allowable expense is the proportion of the rent paid to the landlord that is properly attributable to the part of the home being used solely for business purposes.

Repairs and maintenance

A proportion of the cost of general household repairs and maintenance is allowable in line with the proportion that the house is used solely for the business. Examples include the general redecoration of the exterior or repairs to the roof.

Repairs that relate solely to part of the house that is not used for the business, such as decorating a room not used for the business, are not allowable. Equally if a room is used solely for business purposes then the cost of redecorating that room is wholly allowable.

Running costs

There are some expenses where the total bill may vary with the amount of business use. They include cleaning, heat and light and metered water.

If the claim is small and there is only minor business use of the home, for example the taxpayer writes up their business records at home, you may accept a claim based on any reasonable basis.

Where there is significant business use it is appropriate to apportion such expenses by reference to the facts of that usage.

Cleaning

The facts may result in a higher proportion of costs attributable to either business or domestic use.

For example, a cleaner may clean the living rooms but be under strict instructions to leave the office alone. In this situation, the payments to the cleaner are not an allowable expense.

Heat, light and power

A proportion of the heating and lighting costs of a room used at times solely for business purposes is allowable. The proportion should reflect the facts of usage. Where usage is minor, such as the occasional writing up of records, you may accept any reasonable estimate consistent with such minor use.

You should take into account the number and nature of any power consuming items involved. A commercial photographer working from home using specialist studio lighting will have a much higher business expense for electricity than a trader writing up records once a week in the spare bedroom.

Telephone

The cost of business calls is allowable. Also allow a proportion of the line rental (based on the ratio of business use to total use). This proportion should reflect all aspects of use, including incoming calls, though in most cases reference to itemised outgoing calls will provide a reasonable and acceptable measure.

Care should be taken and a flexible approach adopted when considering the level of apportioned business expenditure, relating to all inclusive packages offered by telephone and broadband providers.

Broadband

Expenditure on an internet connection (including broadband and wireless broadband) is allowable to the extent that the connection is used for business purposes. Where there is ‘mixed’ (business/non-business) use, follow the approach used for telephone rentals.

Metered water charges

In cases of heavy usage the business part of the property may be separately charged (and so fully allowable) in which event none of the domestic cost is deductible.

In the case of minor business use of the premises, such as writing up records, there is no business use of water and so none of the water charge is allowable.