Tax Update July 2024

Welcome to our July Tax Update. In this edition we take a look at the tax point for VAT, pool cars, childcare accounts, selling a subsidiary and events on the accounting horizon, the main one being the General Election this Thursday!

‘TAX POINT’ FOR VAT

The time of supply is the earlier of:

• the date when the supply is ‘really’ made, referred to as the basic tax point;
• the date when a tax invoice is issued in respect of the supply; and
• the date when payment is received for the supply.

There are a number of refinements to be borne in mind in applying this basic rule, particularly the 14-day rule, and there are also special rules for certain kinds of supply.

If a VAT invoice is issued within 14 days of the basic tax point, the basic tax point can be ignored in fixing the time of supply and the date when the invoice is issued is used instead.

The invoice must be a proper VAT invoice and must be issued by the supplier to their customer.

It is possible to opt out of the 14-day rule, but this must be notified in writing to HMRC.

As mentioned in the diary of main tax events, form P11D for reporting benefits provided to employees and directors needs to be submitted online by 6^th July. The most common benefits provided are company cars, private healthcare and loans at less than the 2.25% HMRC official rate of interest.

Where company cars are provided it must be remembered that there may be an additional taxable benefit where private fuel is provided for the company car. This additional taxable benefit does not apply where private fuel for 2023/24 is fully reimbursed by the employee by 6^th July 2024.

For more information on private fuel for company cars – CLICK HERE

Note that where an employee has use of a ‘pool car’ then there is no taxable benefit and an entry is not required on form P11D.  Furthermore, the employer would not be required to pay Class 1A national insurance contributions. The conditions for a car to be treated as a pool cars are very strict and often misunderstood – see below: –

WHAT IS A POOL CAR?

The conditions for a company car to be treated as a pool car are set out in the employment income legislation:

• the car was made available to, and actually used by, more than one employee,
• the car was made available, in the case of each of those employees, by reason of the employee’s employment,
• the car was not ordinarily used by one of those employees to the exclusion of the others,
• in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and
• the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

For more information on pool cars – CLICK HERE

If you have children under 12 who attend a nursery, after school club, playscheme or childminder, or you are considering sending them to a summer camp, you should think about setting up a tax-free childcare account. The government adds 25% to the amounts that you save in the account – up to £2,000 for each child – so £8,000 is topped up to £10,000 (a higher amount applies for disabled children). 

The account is then used to pay OFSTED registered childcare providers. Note that it doesn’t need to be the child’s parents paying into the account; uncles, aunts, grandparents and others can also make payments, The government have noticed that many families who are eligible for this scheme are yet to set up their accounts, so if you are an employer you could bring this to the attention of your staff to increase the take up.

Note that parents are not eligible if either of them have adjusted net income in excess of £100,000 for the current tax year.

When a holding company sells shares in a subsidiary, the VAT incurred on the professional fees involved would normally be irrecoverable, on the basis that a sale of shares is an exempt supply. 

In a recent case a hotel group argued that a subsidiary was sold in order to finance the completion of construction of a new hotel and that there was a direct and immediate link between the raising of the funds and the group’s downstream activities of operating hotels. The Tax Tribunals were satisfied the VAT on the professional fees associated with the share sale was a general overhead of the group’s business and could be recovered as input tax. Based on the Upper Tribunal decision many other groups were advised to make protective claims for the recovery of input tax. 

Unfortunately, the Court of Appeal have now rejected the taxpayers arguments and found in favour of HMRC, thus denying recovery of input tax on the associated professional fees in connection with the share disposal as that is an exempt supply.

• Monday 1^st June – Corporation tax payment for year to 30/9/23 (unless quarterly instalments apply)
• Thursday 4^th July – THE GENERAL ELECTION
• Friday 5^th July – Last date for agreeing PAYE settlement agreements for 2023/24 employee benefits 
• Friday 5^th July – Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2023/24
• Saturday 6^th July – Deadline for forms P11D and P11D(b) for 2023/24 tax year. Also, deadline for notifying HMRC of shares and options awarded to employees.
• Friday 19^th July – PAYE & NIC deductions, and CIS return and tax, for month to 5/07/24 (due 22/07/24 if you pay electronically)
• Wednesday 31^st July – 50% payment on account of 2024/25 self-assessment tax liability due
• Thursday 1^st August – Bank of England Interest Rate announcement

Meet the Tax Team

Matthew Morris FCCA CTA

Tax Partner

Ellie Smith ATT

Tax Senior

Jack Taylor

Accountant

Folkes Worton LLP Chartered Accountants
Accounting for the Future