Business columnist: Graeme Hill talks tax

Owner managed businesses come in all shapes and sizes, writes Graeme Hills, tax manager at the Grantham office of Duncan & Toplis.

While OMB can stand for ‘one man band’, an owner managed business can also be a larger company employing many people.

One thing they all have in common is the need for tax planning and this will often include ensuring tax reliefs are claimed when the business or its owners are entitled to them.

That sounds straight forward enough but when the office for tax simplification was set up to look at tax reliefs, they found 1,042 different types of tax relief in the system!

Some of these were trivial and have been abolished but other very important reliefs remain.

These include;

* will you qualify for entrepreneurs’ relief and pay 10% tax when you sell your business?

* will your spending on machinery obtain tax relief in full this year?

* will you qualify for rollover relief when you replace a business asset?

* will your spending on research and development qualify for enhanced tax relief?

Making sure you claim all the reliefs you’re entitled to can be complex and the planning may need to start years in advance, the benefit of the relief will make forward planning worthwhile.

In particular many businesses are currently taking advantage of the generous tax reliefs available on research and development costs even to businesses not operating in industries traditionally associated with research and development activities.

Getting the right professional advice early from friendly experts who care about the success of your business and have the tax knowledge and commercial experience to make a real difference will help you make the most of the many tax reliefs that are available.

** Useful tips if you’re chasing cars

The provision of a company car is one of the many benefits that can be provided to employees – but it’s important for both the employee and the employer to know where they stand on the tax implications.

Providing an employee with a company car has its own special rules which are designed to tax the benefit of having the car available for private use on the employee.

In broad terms the regime for taxing these cars has two aims: to encourage manufacturers to produce cars which are environmentally friendly and to give employee drivers and their employers a tax incentive to choose more environmentally friendly vehicles.

Company cars are taxed according to the list price of the car but graduated according to the level of its carbon dioxide (CO2) emissions. The percentage charge for most cars has generally been between 11% and 35%, but changes have recently been announced to the emissions tables which now extend to the 2019/20 tax year.

In a drive to encourage the use of ultra low emission cars a five per cent charge is made where CO2 emissions are less than 75 gm/km. These cars are usually electric or hybrid vehicles.

When an employee is required to pay an amount of money for the private use of the car, this amount can be deducted from the car benefit. This reimbursement must be paid during the tax year to be deducted from the benefit.

There is a further tax charge where a company car user is supplied with private fuel or the employee is allowed to claim reimbursement for private journeys. The fuel scale charge is based upon the same percentage used to calculate the car benefit and is applied to a set figure which is £21,700 for the 2014/15 tax year.

The rules on reimbursement do not apply in the same way to the provision of private fuel. Only full reimbursement of all private fuel is taken into consideration, thus removing the benefit.

Partial deductions are not effective.

The employer also has a Class 1A National Insurance Contribution liability of 13.8 per cent on both the car and private fuel benefit.

For advice on car and other employee benefits contact Duncan & Toplis at www.duntop.co.uk.