TWC Update 31/08/2020

I hope you have all enjoyed the summer bank holiday weekend, even though it has felt very much like autumn for most of it!

 I have a few updates for you.....

 The Coca-Cola case – Van v Car

You may recall last year’s court case between, Coca-Cola and HMRC which was centred around when is a van a van for income tax and NI purposes. The court ruled in favour of HMRC. It’s an interesting case and I have attached a case study below for you to see for yourself. If you have any questions regarding vehicles and their tax implications get in touch for some advice on the matter.

 

The Kickstart Scheme    

I have had numerous queries regarding the Kickstart Scheme. The Government promised more detail on the Scheme in August. We are fast approaching the end of this month and as of yet the detail is not fully there. I will share with you what I do know (see below) although I expect there to be further information soon.

 

A CGT Property update

HMRC have set up a portal in which either the taxpayer can complete the CGT Property Return within the 30 day compliance time limit. However until now, the CGT Return portal could only deal with one property disposal per tax year. The agent or the taxpayer would have to contact HMRC by phone (tel. no. 0300 200 3300) to ensure that compliance is met on second and any subsequent disposal. HMRC have now stated that the portal is now capable of being used for multiple disposals.

 

Please be aware that the CGT portal can still not deal with amendments to the CGT Return. If amendments need to be made you will have to contact the HMRC CGT helpline tel. no. 0300 200 3300.

 

The Job Retention Scheme

 Just a reminder that the Job Retention Scheme moves into a new phase from 1^st September. In respect of those furloughed employees, from 1st September the Government will meet 70% of the wages up to £2190. With the remaining 10% to be met by the employer.

As always, if you have any questions, please don't hesitate to get in touch.

Aaron Mcleish

info@togetherwecount.co.uk

01273 569088

0114 4000 119

Coca Cola V HMRC

The result of the case

•     The Court of Appeal found in favour of HM Revenue & Customs (HMRC) that certain types of modified crew cab vehicles should not be classed as ‘vans’ for income tax and national insurance purposes but as cars instead.

What does the tax legislation say a van is?

•    It is a goods vehicle and has a design weight not exceeding 3,500 kilograms and is not a motor cycle. 
•    A ‘goods’ vehicle is defined as one of a construction primarily suited for the conveyance of goods or burden of any description.

 

What important points came out of the Court of Appeal ruling?

•    When deciding whether it is a ‘van’ or a ‘car’ it is not the original design of it but the construction/adaptation of it when it is made available to the employee.
•   Although the look of the vehicle is a factor, it is not a significant one.
•   The fact that a vehicle is used for private purposes is, in itself, irrelevant in deciding whether or not, for income tax/NI purposes, it is a ‘van’.
•    The importance is whether or not the vehicle fits the definition of a ‘car’ or a ‘van’.
•    The Court placed great emphasise on what is meant by ‘primarily’ suited for the conveyance of goods.
•      The Court felt that multipurpose vehicles would be deemed to be a ‘car’ if the construction of the vehicle, when looking at it as a whole, was only ‘marginally’ in favour of it being a goods vehicle than a car. ‘Primarily’ means more than that.     
•    The three vehicles in question were originally constructed as panel vans but were modified.
•    One vehicle was modified to incorporate a second row of seats which could be removed (using tools) and a window added at the side of the seats.
•   The other two vehicles already had a second row of seats, removable (without using tools), with windows either side of them, behind the driver and front passenger seat. Racking was required to be installed by the driver when the vehicle was used on business.
•    All 3 vehicles were modified to provide added protection for those sat in the second row of seats to prevent loose items from entering their area if the vehicle had to brake suddenly.  

Why does it matter whether a vehicle is classed as a car or a van for tax purposes?

•    The current benefit it kind charge for a ‘van’ is £3,490 (£2,792 - no CO2 emissions).
•    If treated as a ‘car’, the benefit in kind charge could be considerably higher as it is normally calculated based upon the car price graduated according to the level of CO2 emissions.
•   If regarded as a ‘car’ this could have a knock-on negative impact on the level of Class 1A national insurance for a business to pay.
•   If private fuel is paid for by the business, the car fuel benefit in kind figure is likely to be considerably higher than the fixed van fuel charge of £666 where CO₂ emissions come into play.
•   Vans are potentially eligible for the annual investment allowance whereas cars are not. Capital allowances relief is likely to be spread over a longer period for cars.
•     Input tax can be claimed in part or in full on the purchase of a vehicle classed as a ‘van’ for VAT purposes, but the recovery is generally blocked if a car is purchased, where private use maybe involved.  

 

It is worth knowing

•    It is worth noting that, a combi-vehicle with a payload of 1 tonne or more is not a car for VAT purposes.
•    Double cab pickups (but no other type of dual-purpose vehicle), HMRC accept that where the vehicle meets the ‘van’ payload test for VAT purposes, they will apply the same treatment for benefit in kind purposes.
•    HMRC produced a list of combi vehicles which they felt were, for VAT purposes, either a ‘car’ or a ‘van’. The list has not been updated since May 2015. See below for a link to the list.

 

Looking forward

•    If Coca Cola don’t appeal against this judgement, we expect HMRC will review all those employees with ‘vans’. Worst case scenario is that they could try and open up earlier years where they believe they can apply this precedent.
•    In light of the Coca Cola case, I would be perhaps be reviewing my employees to see who have been declaring the ‘van’ benefit and making them aware of the result of the Coca Cola case and the potential repercussions of it.
•    Some vehicles will be clear cut panel vans or fit the double-cab HMRC concession. But will some have been adapted from the original construction to include such things as additional seats and side windows? Will they now no longer be ‘primarily suited’ for the conveyance of goods?

Full links

1              https://www.judiciary.uk/wp-content/uploads/2020/07/HMRC-v-Payne-Ors-Approved-Judgment-002.pdf

2              https://www.gov.uk/government/publications/hm-revenue-and-customs-car-derived-vans-and-combi-vans

                                                                                                                                         

The Kickstart Scheme

• Employers will receive funding of up to 100% of the National Minimum Wage from the Government for each employee (aged 16-24) covering a maximum of 25 hours a week.
•  The Government will also cover the relevant employers National Insurance costs.
• The Government will also cover the relevant employer automatic enrolment pension scheme contributions.
• A business can pay in excess of the minimum wage and offer more hours of work but that will not be covered by the Scheme.
• The individual must be on Universal Credit and deemed to be at risk of long-term unemployment.
• The funding will be for each 6-month job placement.
• The employer can top up the wages if they so wish.
• Companies who take part in the scheme will have to prove that the jobs they are making available are new and are not replacing any already existing jobs
• They also have to be jobs ‘above and beyond’ any jobs they were expecting to create.
• Jobcentre plus will be the main driver enforcing this and act as a sort of matchmaker. However, when it is available, businesses will be able to advertise for eligible applicants or use a Recruitment agency to source suitable applicants.
• The Scheme was supposed to be up and running in August. It is likely to be from September now.
• Any employer is eligible to be part of the Scheme.
• There would appear to be no limit on the number of Kickstart ‘employees’ that can be recruited.
• There is a belief that the Government will set up a Gateway portal for participating businesses to claim back the Kickstart monies similar to what has occurred as regards the Job Retention Scheme. 
•  At present the scheme is intending to run through to the end of December 2021 but it will be under review throughout.