Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.

While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.

 

Double-Cab Pickup

Since April 2002, HMRC has accepted that the treatment of double-cab pickups for income and corporation tax should follow the rules for VAT. Double-cab pickups were therefore treated as vans across the taxes, provided the payload (gross vehicle weight less the unoccupied kerbside weight) was one tonne (1,000kg) or more.

The last year or so has seen a number of changes back and forth.

The current position is that while there is no change to the VAT treatment, from April this year the treatment of expenditure on a double-cab pickup changed for benefit-in-kind and capital-allowances purposes and for income and corporation tax, the payload of a double-cab pickup no longer determines whether the vehicle should be treated as a car or a van.

A double-cab pickup’s primary purpose is not the transportation of goods and therefore for income and corporation tax it will be treated as a car.

The difference in capital allowances treatment will impact the timing of the tax relief as neither the annual investment allowance nor full expensing is available on cars. The rate of tax relief is likely to be at 6% writing-down allowances rather than full relief in the year of purchase.

The leased car rules apply where the emissions are above 50g/km, following the same criteria for capital allowances. As most double-cab pickups are not classed as goods vehicles and currently have higher levels of emissions, the 15% disallowable element will most likely apply on expenditure on lease costs after April 2025.

So, the tax rules have become much less favourable, making double cab pickups less attractive but the VAT rules have not changed. Many people like the flexibility of the double cab pickup and the fact that you can still reclaim the VAT will mean that they remain an attractive option, just not quite as attractive as before.

 

Sin Taxes

These include taxes on activities that are harmful to individuals but also could include activities that are harmful to the planet.

Many people will object to the prospect of much higher taxes on gambling, alcohol and tobacco. However, given that each of these activities is costly to the nation in terms of demands on the National Health Service and/or social services there is a perfect logic to making them invest.

In 2023/24 those three areas of taxation brought in a total of £27bn. If say the rates of tax were to be doubled there would be significant additional funds for the government.

In addition, the government could legalise cannabis resulting on tax being collected on sales and profits.

The soft drinks industry levy is currently negligible in tax terms could this be expanded to benefit the health of future generations.

There seems to be a general acceptance that a switch from petrol and diesel cars and larger vehicles to electric is both necessary and inevitable. Increasing fuel duties and possibly re-jigging the vehicle excise regime might be an incentive to switch to electric.

They could also raise air-passenger duty to discourage unnecessary air travel and improve the environment.

 

Whistleblowers

The number of whistleblowers prepared to inform HMRC about fellow taxpayers avoiding tax is rising all of the time.

However, the rewards being paid out by HMRC are falling, amounting only £882,000, suggesting that the tax recovered from whistleblower leads has fallen.

In the 2024-25 tax year HMRC received almost 165,000 tips from the public about potential tax avoiders. This was 9% higher than 2023-24.

Clearly it is not an effective tool in closing the tax gap. It may be that the rewards for a valuable tip off are just not high enough.

The US Inland Revenue Service pays between 25% and 30% of any tax recovered from cases, to whistleblowers. HMRC makes payment for tip offs on a case-by-case basis, determined by discretion rather than a fixed percentage of recovered tax.

The IRS paid out $123.5m (£91m) in the last financial year, which led to the recovery of $474.7m (£350m) in tax, showing there is a clear connection between incentivising whistleblowers and tax recovered.

 

Company Car Tax

Buying a company car can offer several advantages when it comes to tax savings. Deducting car-related expenses, like maintenance and insurance, from business profits reduces corporation tax liability. Additionally, depending on the vehicle and its usage, businesses can claim capital allowances on the purchase price and potentially reclaim VAT.

But insurance premiums for company cars can be higher than for personal vehicles.

Purchasing

With lease hire, monthly lease payments are deductible in the period incurred, reducing accounting profits. The vehicle also does not appear on the balance sheet for now, although this is set to change when the lease accounting rules change next year, bringing leases on the balance sheet.

However, lease payments provide steady tax relief and lower upfront costs, making it suitable for businesses with fluctuating profits or limited cash flow.

If purchasing through hire purchase, the full purchase price qualifies for tax relief in the year it was bought, and the vehicle appears as an asset on the balance sheet. This can be beneficial in high-profit years and for companies seeking to enhance asset value ahead of external investment or sale.

Electric vehicles

Electric company vehicles come with their own set of rules. Limited companies can claim a 100% first year allowance on the purchase of new, fully electric vehicles. This means the full cost of the vehicle can be deducted from taxable profits in the year of acquisition, subject to sufficient profits.

Businesses can claim 100% of the installation cost of workplace EV charge points through capital allowances.

Using personal vehicles

It’s important to look at the difference between having a company car versus using personal vehicles.

Using a personal car for business purposes can offer several advantages, particularly for directors and employees who do not require a vehicle full-time.

Rather than committing to the costs and tax implications of a company car, individuals can instead claim mileage allowance relief for business journeys, currently 45p per mile for the first 10,000 miles, then 25p thereafter.

This approach can be more tax-efficient, especially for lower-emission vehicles and gives the individual full control over the choice, financing, and use of the vehicle, without the complications of company ownership or restrictions on private use.

Benefits in kind

When a company car is made available for an employee or director’s personal use, it is treated as a benefit in kind (BIK) and taxed accordingly.

The taxable value is based on the car’s list price, its CO2 emissions, and fuel type. Higher-emission vehicles attract higher BIK rates, sometimes over 30%, including hybrid cars, while electric cars are currently taxed at a much lower rate of 3%, making them far more tax-efficient, but this rate will continue to increase annually until at least 2029-30.

Employees must pay income tax on the BIK value, and employers also pay Class 1A National Insurance. If private fuel is provided, this is taxed separately and can significantly increase the total tax liability, often outweighing the benefit.

As a result, many businesses and employees are now opting for low-emission or electric vehicles, particularly via salary sacrifice schemes, which offer considerable savings for both parties.

 

Employee Homeworking

HMRC can charge a benefit in kind when paying the employee more than the flat rate amount of £312 per year for use of home as office expense.

For reimbursements of more than £6 per week to be exempt there must be arrangements between the employer and the employee, and the employee must work at home ‘regularly’ under those arrangements.

‘Regularly’ in this context means where working at home is frequent or follows a pattern. For example, where an employee agrees to work three days each week on the employer’s premises and two days at home.

The exemption does not apply where an employee works at home informally and not by arrangement with the employer. It applies where an employee works at home by arrangement with the employer instead of working on the employer’s premises.

In addition to the need for formal arrangements, evidence must be retained to show how the amount of additional costs arising from homeworking have been calculated.

There are various conditions that support a tax free claim:

• the duties that the employee performs at home must be substantive duties of the employment. These are duties that an employee has to carry out and that represent all or part of the central duties of the employment, rather than say preparatory duties such as background reading in advance of a meeting; or
• those duties cannot be performed without the use of appropriate facilities and no such appropriate facilities are available to the employee on the employer’s premises; or
• the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect them to travel to those premises on a daily basis,

Where the employee has the ability to choose whether they work from home rather than from the employer’s premises, then the payments are unlikely to be tax free.

 

 Questions?

If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.