By Catherine Chetwynd
HMRC statistics indicate that out of 945,000 company cars, some 200,000 are still driven by people who are paid private fuel allowances. Yet there is little to recommend this policy, from either the employee’s or the employer’s perspective.
Drivers perceive private fuel allowance as a perk, when in fact it is probably costing them money. The problem for employers is that this misconception can make it difficult to remove the facility. One alternative is to discontinue the allowance from a certain date, so new employees do not receive it. With existing employees who do gain, that employee can be bought out by calculating the difference between the taxable charge and the actual cost of the fuel and then grossing up that difference for tax and national insurance charges.
It used to be the case that it could be tax-advantageous to incoporate your sole-person or small business. Depending on your level of profits, you could pay less tax overall by awarding yourself only a small salary, and then taking other profits out of the company by way of dividends. But the developments discussed below may well cancel out any advantages, especially for companies.with smaller profits.
Posted by taxwriter | on Thu, 13/08/2015 – 13:26
Since the Summer Budget, the topic dominating professional discussions on AccountingWEB and elsewhere has been the Chancellor’s proposed new tax on company dividends.
As a reminder, the Finance Bill 2016 will abolish the 10% tax credit on dividend income, which will cease to be grossed up in personal tax computations from 6 April 2016. In its place will be a £5,000 dividend tax allowance.