Author: Glenn

The VAT treatment of motor expenses is an important concern for any business that incurs VAT on these costs. Below, we highlight key points to consider regarding the recovery of input tax (VAT) when leasing vehicles.

We have covered below some important points to be aware of concerning the recovery of input tax (VAT) when leasing vehicles.

• Leasing company recovering VAT on purchase of cars. A leasing company can usually recover the VAT incurred as long as the cars are leased at a commercial rate.
• Businesses leasing a car and recovering the VAT. If a business leases a ‘qualifying car’ for business purposes they cannot, in most cases, recover 50% of the VAT charged. The 50% block covers the private use of the car. The business can reclaim the remaining 50% of the VAT charged, subject to the normal rules.
• Cars leased primarily for taxi or driving instruction. A business can reclaim all of the VAT charged on the lease if the car is a qualifying car and the business intends to use it primarily for:
  • hire with a driver for carrying passengers; or
  • providing driving instruction.
• 50% block applying to self-drive hire (daily rental) as well as leasing. This restriction applies if the car is hired simply to replace an off the road ordinary company car.

There are specific customs requirements for commercial goods that you take with you to sell abroad. You must declare any goods intended for sale outside the UK, whether they are in your baggage or a private vehicle.

The regulations for commercial goods or samples carried by passengers in their accompanied baggage are known as Merchandise in Baggage (MIB). As of January 2024, the threshold for simplified declarations of MIB increased to £2,500 (increased from £1,500). If your goods fall below this threshold, you can make a simple online declaration within five days before your departure.

A full export declaration is necessary if the goods exceed £2,500 in value or if they are subject to excise duty or import/export restrictions.

For Northern Ireland, different rules apply. If you are taking commercial goods from Northern Ireland to Great Britain or the EU in your accompanied baggage, no declaration is required.

There are separate procedures for temporarily taking goods abroad (such as samples for a trade fair) or when using a courier or freight forwarder.

There are specific rules that restrict changing a company’s year-end date, also known as the "accounting reference date". Initially, this is based on the date of incorporation. Under certain conditions, it’s possible to adjust the accounting year-end, which may offer trading or tax advantages for some businesses.

You can generally change the year-end for the current financial year or the one immediately preceding it. Altering the year-end will also adjust the deadline for filing accounts, except during a new company’s first financial year.

You can shorten the year-end date an unlimited number of times, but you can only extend it once every five years, with a maximum extension of 18 months. Extensions may occur more frequently under specific circumstances, such as if the company is in administration.

To request a change to an accounting reference date, you can use the Companies House online service for a quicker process or submit a postal version of the Change of Accounting Reference Date (AA01) form. Changes cannot be made for periods where accounts are overdue.

While there is no definitive reason to choose one date over another, various factors should be considered. The most common year-end dates are typically 31 December (to align with the calendar year) or 31 March (to align with the tax year).

Additionally, the Companies House rules stipulate that the year-end cannot be changed for any period where the accounts are overdue .

There are a little over three months remaining to file your self-assessment tax return online for 2023-24. The deadline is 31 January 2025. As this date approaches, an increasing number of individuals are reaching out to HMRC’s helpline for help. 

To help ease the demand, HMRC has shared the top five reasons people are calling the self-assessment helpline and is encouraging everyone to use the online resources for quicker access to information.

The 5 most common reasons for calling the helpline are:

1. I no longer need to complete a self-assessment tax return.
2. I need to register for self-assessment.
3. Can you tell me if I still have to complete a tax return?
4. What’s happening with my self-assessment registration?
5. What’s happening with my self-assessment repayment?

Taxpayers may need to complete a tax return, even if they pay taxes through PAYE, for example, if they:

• are self-employed and have earned gross income over £1,000;
• are self-employed and earned up to £1,000 and wish to pay Class 2 NICs voluntarily to protect their entitlement to State Pension and certain benefits;
• are a partner in a business partnership;
• had a total taxable income of more than £150,000;
• have received any untaxed income including pension income over £2,500;
• received income over £1,000 from trading or providing services online;
• have to pay the High Income Child Benefit charge;
• received interest from banks and building societies or investments (more than £10,000); or
• received rental or letting income from UK land and property.

Over 12 million taxpayers need to complete their self-assessment for the 2023-24 tax year and pay any taxes due by the 31 January 2025.

If you have submitted a self-assessment return and later realise you need to make changes, there are specific rules to follow. This situation might arise if, for instance, you entered a number incorrectly or omitted certain information from your self-assessment return.

If you filed your return online, you could amend your return online as follows:

1. Sign in to your personal tax account using your Government Gateway user ID and password.
2. From ‘Your tax account’, choose ’Self-Assessment account’ (if you do not see this, skip this step).
3. Choose ‘More Self-Assessment details’.
4. Choose ‘At a glance’ from the left-hand menu.
5. Choose ‘Tax Return options’.
6. Choose the tax year for the year you want to amend.
7. Access the tax return, make the corrections, and file it again.

You must wait 3 days (72 hours) after filing before updating your return. If you opted to file your return on paper, you would need to download a new return and fill in the pages that you wish to change and write ‘amendment’ on each page. You must also include your name and Unique Taxpayer Reference on each page and then send the corrected pages to the address where you sent your original return.

If you used commercial software to submit your self-assessment return, then you should contact your software provider in the first instance. If your software provider cannot help, contact HMRC.

The deadline for making changes for the 2022-23 tax year using the methods mentioned above is 31 January 2025. If you miss this deadline, you will need to write to HMRC. For example, if you discover an error in your 2021-22 return after 31 January 2024. Your letter should specify the tax year you are correcting, explain why you believe you have overpaid or underpaid tax, and state the amount involved. You can request a refund up to four years after the end of the relevant tax year.