Double
cab pickups
There
has been a lot of publicity lately about the tax advantages of running
cars with low CO2 ratings. There are a number of benefits:
. possible
100% first year tax deduction for the cost of the vehicle,
. much reduced benefit in kind charges,
. lower road fund tax and so on.
But not
all of us want to run such vehicles even if there are tax, VAT and running
cost advantages.
Double cab pickups, sometimes described as crew cab pickups, are an
anomaly!
For business
users, especially the self-employed, they present an unusual tax opportunity.
The HMRC
web site describes double cab pickups as:
"...
a front passenger cab that contains a second row of seats and is capable
of seating about 4 passengers, plus the driver with four doors capable
of being opened independently (two door versions are normally accepted
to be vans, even those with rear doors that can only be opened after
the front doors and that must be closed before the front doors) and
an uncovered pick-up area behind the passenger cab."
From the
tax year 2002 -03 onwards a double cab pickup is classified as a van
for both VAT and benefits purposes if it has a payload of 1 tonne (1,000kg)
or more.
If your
double cab pickup meets this definition:
1. You
can reclaim any VAT added to the purchase price, and
2. The net capital cost (after VAT has been reclaimed) could be available
for a 100% first year tax allowance as part of your Annual Investment
Allowance up to a maximum of £50,000 each tax year.
If you
are a director or employee any significant private use of the double
cab pickup, will trigger a standard benefit in kind charge of tax on
£3,000 per year. In addition if your firm/employer provides fuel
to cover private use of the vehicle there will be an extra benefit charge
of tax on £500 per year at current rates. The best way to minimise
any risk of these benefits being applied is to restrict the use of the
pickup to business use only, or make sure that any private use meets
the HMRC definition of "insignificant private use".
If you
would like more information regarding this article, or any advice regarding
tax effective strategies for running your business vehicles please call.
Am
I Running My Taxi Company Correctly?
I regularly
receive phone calls and letters from Taxi Operators asking: "Am
I am running my taxi company correctly?"
There
is no such thing as a perfect taxi operator. A good operator is one
who employs the laws of the country and those pertaining to the taxi
trade to their advantage. Many give little or no thought to the set
up of their company and "fly by the seat of their pants" rather
than seek professional advice.
When the
above question is asked of me, I always state there are three issues:
self employment; value added tax (VAT) and profitability. It is important
that these are addressed individually. There is a significant interrelationship
between self employment and VAT and the correct utilisation of both
benefit the operator significantly. Profitability naturally ensues the
correct set up of any business. Addressing the above factors individually,
I would comment as follows:
Self Employment
Many
operators consider all their drivers to be self employed whether or
not the driver provides their own vehicle.
Genuine
self employment within the taxi trade is based upon the provision of
the vehicle by the driver and not by the operator. Any operator who
considers drivers to be self employed when they are providing the vehicle
themselves may face serious taxation and financial consequences.
If the
vehicle is provided by the company it is considered under tax law to
be the "tool of the trade", therefore here he driver is using
the assets of the company and should be employed by the company. Any
taxi operators who conduct their business this way will find that when
their affairs are inspected by HM Revenue & Customs (HMRC) their
drivers are not self employed and that the amount "earned"
by this driver will effectively be their net wage. It will be necessary
for this wage to then be "grossed up" for tax purposes and
employers national insurance added to this figure.
It is
difficult to specify the liabilities exactly but a driver who earns
in the region of £300 per week will have additions by way of taxation
and employers national insurance (NIC) of approximately £100 per
week. When one considers this is a weekly amount it is interesting to
consider the implications of treating the driver as self employed. If
a driver is truly SELF EMPLOYED the actual cost to the company is the
actual amount paid not the additional costs. It they are employed whether
actually or not, the actual cost is considerably greater. Hence this
reflects itself in the profitability of a company
Value Added Tax (VAT)
VAT is
extremely complicated within the taxi industry. It is one of the few
industries that has its own VAT scheme to deal with the complexities
within the industry. The reasons are difficult to explain but it is
a consequence of the original legislation that was set up when VAT was
"introduced in 1973". The position relating to the taxi industry
was not modified to the current position via statutory changes but predominantly
by case law.
The position
now is that the taxi operator has to act either as a "Principal"
or "Agent". It is possible to act as both but this is extremely
complicated and awkward and rarely works to the advantage of the operator.
Whether an operator wishes to act as a Principal or an Agent has to
be "determined by their operating style." Do they for example
undertake only cash work or do they do a considerable amount of account/contract
work or a combination of both?
The additional
difficulty is the utilisation of "Split Bag" by many taxi
operators. This is a poor way of operating a taxi business due to VAT
implications. The reason for this is that the total income on a split
bag operation is deemed to belong to the taxi operator whereas the operator's
pinion is that monies received after the driver has taken their share,
should be treated as the company's income.
I have
highlighted the majority of the problems although there are some other
minor ones that need to be taken into consideration. When one considers
the issues of principal and agent and split bag, it does indicate that
a thorough professional overview of the trading style of the taxi operator
should always be considered.
Applied
correctly, the utilisation of VAT can add significantly to the profitability
of the business.
Profitability
Many
taxi operators exist and operate in exactly the same way as their competitors
and would not consider changing their trading style although this may
enhance profitability.
Change
is difficult but is often needed for the good of the business. A simple
example of this is where companies operate account work but do not make
any profits as they give the full fare to their drivers. What other
business would operate in this way?
The profitability
of any business depends on sound management. An independent overview
of the business may be very useful and should be considered by current
operators.
Hopefully
the above goes some way to providing answers to the question raised
at the start. Seek professional help if necessary and your life may
be easier and more profitable.
For further
advice please contact us
Unfair
Dismissal - Don't Get It Wrong
You may
have had to cope with a whole host of personnel-related issues over
the years, and almost certainly played it by the book. However, even
experienced employers can get it wrong. Here is a case in point.
Pushing
the boundaries
An employee's
performance and attitude were deteriorating and so she was spoken to
by her manager. Six months prior she had suffered a miscarriage and
although distressed had returned to work and appeared her usual self.
Another 'pull your socks up' chat ensued three days prior to her announcing
she was pregnant again.
Now, not
only was her work rate particularly slow, but her punctuality was wanting.
She worked part time on Friday, Saturday & Sunday but booked all
her ante-natal appointments for Fridays. This was apparently the only
time her midwife was available. She would arrive at work at 9am, and
then leave at 10am for her appointment and not return until lunch. At
the time there were eight people working at various times, so her absence
at such short notice caused significant issues. Furthermore, when she
had time off due to sickness, she failed to produce a sick note, maintaining
that her doctor refused to until she had recovered!
She was
written to by her employer on numerous occasions but never responded
and even when disciplined failed to react.
After
yet another bout of sickness, she was asked to attend a 'return-to-work'
meeting. This was not a disciplinary hearing and was never described
as such. When questioned by her boss regarding her behaviour, she simply
sat smirking and produced a letter for her manager to read. Although
reluctant her boss finally agreed and left the office to read this letter.
On returning she told her employee that she did not appreciate her accusatory
tone and then sacked her!
In the
letter the employee made several allegations professing that she had
been discriminated against because of her sex and pregnancy. Her boss
had been pushed to the limit and on returning to the meeting was unable
to think rationally. But by dismissing her without following a procedure,
the damage had already been done.
The employee
as expected claimed unfair dismissal and discrimination. With regard
to the unfair dismissal the employer was guilty as charged and acknowledged
this. However they strongly denied any discrimination or victimisation.
Sadly, they were confronted with a real issue here as they had stated
that they never intended to dismiss her at the meeting and it was the
allegations towards them that pushed the boss to do so. The tribunal
considered the letter to be the reason for her dismissal and she won.
TIP:
This above case proves how vital it is to not allow emotions to impede
decision making. Always stick to the correct procedures, even if it
pains you to do so!
