The new status has been introduced to counter so-called “disguised employment” arrangements, where staff are elevated to the status of partners (also defined as members) of LLPs in order to benefit from self-employed tax status. The LLP employer also saves Class 1 NIC contributions.

HMRC have argued that the underlying relationship between the LLP and partners who fall into this category has not changed and that they remain, in essence, employees rather than partners – hence the description “disguised employment”.

From April this year all LLP members/partners will have to pass a new test to determine if they are salaried members. Members who are reclassified in this way will be treated for Income Tax purposes as employees of the LLP and subject to PAYE in the normal way. Salaried members will also be subject to the employee-related benefit in kind rules.

The status test will consider three conditions which need to be met for a member to be considered a salaried member:

The member receives a fixed or variable sum that could be considered to be substantially (80% or more) disguised salary. Generally, this will cover arrangement where members’ “salaries” seem to be paid without reference to the underlying profit or loss of the LLP – as a whole.
The member does not have, or cannot exert, “significant influence” over the management and affairs of the LLP as a whole, and
The member’s capital contribution is less than 25% of the disguised salary in a year. This condition is further complicated if there are changes to capital contributions in the year.
From a planning perspective these definitions are uncertain in their application; particularly the second point: what constitutes “significant influence”?

LLPs with salaried members will be liable to employers’ NIC contributions, and the combined cost of the salaried member’s salary and employers’ NIC will be an allowable deduction in the LLP’s tax computation.

One thing is clear, all LLP partnerships should undertake a review of their members’ tax status before 6 April next year.

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The cash equivalent of the asset provided is the annual value of the asset’s use, plus expenses (other than costs of acquisition) incurred in connection with the asset that would not have been incurred without the provision of the benefit.

Land: the annual value of the asset’s use is the greater of the gross rateable value when the property was last rated, and any rent paid by the provider.
Assets other than land: the annual value of the asset’s use is equal to 20% of the asset’s market value when it was first used to provide a benefit. If the provider paid rent for the asset that was more than the 20% calculation, then the higher figure is used.
If an asset is provided for part of a tax year the above cash equivalent figures would be adjusted accordingly.

For example:

A company buys a boat for a director’s private use on 6 April 2013 for £25,000. It takes out a loan to buy the boat and interest charges are £4,500 in the year to 5 April 2014.

Running costs paid by the employer in the year are £2,400 and the director makes a contribution of £1,500.

The benefit would be £5,900 (20% of £25,000 plus expenses £2,400, less £1,500 made good by the director).

The bank interest charges are disregarded as they are part of the cost of acquisition.

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Although we are now at the beginning of a new calendar year we are in the last quarter of the current tax year.

Whether you are a business person, property landlord or pay significant amounts of tax as an employed or retired person there is now a short window of opportunity to examine your likely earnings for the 2013-14 tax year and, more importantly, see what can be done to minimise those liabilities.

It is impossible to outline all of the possible tax planning issues that could be of benefit. We have listed below a few and would suggest that you give us a call to discuss your individual circumstances.

Have you maximised your ISA investments this year?
Have you maximised your pension contributions?
If possible have you utilised your Capital Gains Tax personal exemption? Currently £10,900 for 2013-14.
If your employer still pays for the private fuel used in your company car you can effectively avoid the car fuel benefit charge if you repay your employer for the private fuel before the end of the tax year. It may be worth crunching the numbers as the tax on the benefit in kind is expensive and the private fuel refund may be less.
For Inheritance Tax purposes each person can give £250 a year to any number of recipients, as well as £3,000 annually over and above that amount. They can also make regular gifts out of their income (not capital) that should fall to be exempt.
If you are married or in a Civil Partnership and one partner/spouse has a much lower level of earned income, consider transferring income producing assets to the lower income earner. With Income Tax rates at a maximum 45% this current tax year, savings could be significant.
If you or your partner/spouse are affected by the Child Benefit claw back for high income earners, have you considered equalising your income (if possible) to avoid the charge, or have you considered your obligation to file a Self Assessment tax return to disclose your liability?
If your income is likely to exceed £100,000 this tax year have you considered the potential reduction or loss of your personal tax allowance?
If you are a high income earner paying tax at the 45% additional rate could you take advantage of charitable donations reliefs or other planning opportunities to defer, reduce or eliminate the impact the 45% rate?
Is it likely you will have business tax losses for 2013-14?
As indicated above every person’s circumstances are different and the above list is by no means exhaustive. Please call if you would like to organise a review of your tax planning opportunities for 2013-14.

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Section 14 of the VAT Notice 733 spells it out:

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000345&propertyType=document#P633_59475

The following is extracted from HMRCs notice:

If you use the cash turnover method of accounting you may be eligible for bad debt relief if:

• you have not been paid by your customer and it has been six months since you made the supplies
• you have not accounted for and paid tax on the supply
• you have written off the debt in your accounts.

If you meet all these conditions, your claim will be for the difference between the VAT you charged to your customer and the amount you would have declared to us had you been paid. As with businesses that use the basic and retailer’s methods, this is because your flat rate takes account of input tax that you would otherwise have been entitled to, if you had been paid by your customer.

You can make the adjustment as follows:

1. Identify the VAT in the unpaid supply – eg Total price = £1,200
   VAT= £200
2. Calculate the VAT that would have been paid under the flat rate scheme if your customer had paid you – £1,200 × (say) 12% = £144. That is the total owed (including VAT) multiplied by your flat rate scheme percentage.
3. Subtract the sum of step 2 from the sum of step 1 – £200-£144 = £56
4. Step 3 is your special allowance under the flat rate scheme. Include it in your VAT account in your next return.

Note: if you apply for bad debt relief on a supply made while using the FRS you should make the adjustment as above, even if you have withdrawn from the scheme.

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VAT fuel scale charges, for taxing private use of road fuel, have been changed for periods commencing on or after 1 May 2013.

The scale charge for a particular vehicle is now determined by its CO2 emissions figure. Where the CO2 emissions figure of a vehicle is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge. For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO2 emissions figure HM Revenue & Customs (HMRC) have prescribed a level of emissions by reference to the vehicle’s engine capacity (cc) as follows:

The HMRC website has details of the CO2 emissions amounts and the related fuel scale charges. The tables on the HMRC website show VAT inclusive scale charges applicable in each accounting period, depending on whether it is a 12 month, three month or one month accounting period.

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The National Minimum Wage rates are increasing from 1 October 2013. They will be:

•         Apprentice rates: £2.68 per hour. * But see note below.

•         Under 18s: £3.72 per hour.

•         18 to 20 years: £5.03 per hour.

•         Age 21 years and over: £6.31 per hour.

*This is the rate for apprentices under 19 years old or in their first year. Those 19 years or over and past the first year of apprenticeship should be paid at the rate applicable to their age.

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Here are some of the situations to be aware of.

1.    If you are self-employed and your business assets include a car, you should be reducing your claim for capital allowances and running costs based on your private use of the vehicle. The percentage added back should be based on documented evidence. This usually means keeping a mileage log for at least a part of the year.

2.    If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allow you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter); and, the number of miles you claim. The 45p/25p rate HMRC allow is a maximum as regards being non-taxable. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.

3.    If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. In other words fuel for private use is a benefit you probably do not want – because the tax charge is so high. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Unless you do an exceptionally high amount of private motoring, then the cost of reimbursing the employer for the fuel will be much less than the tax charge created by the benefit-in-kind assessment.

In examples 1 and 3 above you will need to record your private mileage of the vehicle, in example 2 your business mileage. In all three you will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:

•         Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.

•         The business miles claimed should not be rounded.

•         Home to work mileage should be excluded.

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Confirmed Route : (All Distances are approximate)

Day 1: Blackpool to Manchester – (51.46 miles)

Day 2: Manchester to Barlborough – (60.94 miles)

Day 3: Barlborough to Huntingdon – (94.5 miles)

Day 4: Huntingdon to Northfleet – (89.63 miles)

Day 5: Northfleet to Calais – (90.97 miles)

Day 6: Calais to Amiens – (100.69 miles)

Day 7 : Amiens to Chantilly (71.4 miles)

Day 8: Chantilly to the Eiffel Tower cia the Champs Elysee – (31.75 miles plus a celebration evening dinner cruise along the Seine)

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Dr Samadian is a geriatrician, and specialises in the health care of elderly people.
He works full time for the Epsom and St Helier NHS Trust, in an employed (PAYE) capacity, at two hospitals in south
London; the St Helier and the Nelson. He has a permanent NHS office, with full administrative
support, including a secretary.
In addition, Dr Samadian holds weekly out-patient sessions at two private hospitals; St Anthony’s in
Cheam and Parkside in Wimbledon. His NHS secretary acts as his secretary in his private practice in
her spare time.
His private patients are generally wealthy, insured, over 75 years of age and with multiple medical problems.

The Tribunal panel led by Judge Kevin
Poole, acknowledged that Dr Samadian had a dedicated office
in his home which was used for his professional
activity.

However, the panel did not accept that the home
office was the starting point for calculating  business mileage involving habitual journeys.

The decision might have a wide interpretation across all professional self-employed activity, where
the business owner undertakes substantive work at home, but also has another business base at
which they deliver their expertise on a regular basis.

For example, a surveyor may draw plans in a home office, but finalise the work in a studio at
his office premises.

An accountant may regularly work at home in the morning  and then travel into the main office to conduct a meeting in the afternoon. If business mileage is claimed, HMRC could now argue that mileage is disallowable.

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