COMPANY CAR TAX CHANGES

Tax on company cars will change in April 2002. The tax charge on a company car will be based on the level of CO2 emissions and the manufacturer's list price. That is, the taxable benefit will be the list price multiplied by a percentage figure relating to the level of CO2 emissions for that particular model. There will be no reduction for high business mileage. The effect of this will be to penalise those who do high business mileage. For example, the driver of a company car which does at least 18,000 business miles a year, seems likely to have his tax bill (relating to his car) doubled for a car whose emission level is between 240 and 245 grams of CO2 per kilometre (in 2002/03). For emissions above this level the additional tax bill will be even greater, and the taxable benefits will increase in 2003/04 and 2004/05, as the same emission rates will attract increasing amounts of taxable benefit. On the other hand, drivers of low emission cars, who rarely use their cars for work purposes, could see their tax bills more than halved. This seems very unfair to people who simply couldn't do their work without a car. But it appears that all that can be done, if another company car is to be provided, is to go for a low emission car at the next renewal. Doing this will also reduce employers' costs, as National insurance is now charged on company cars, based on the taxable benefit.

You can find out about emission rates on the Internet: http://www.vcacarfueldata.org.uk/search_form_basic.asp At least manufacturers' list prices have reduced over the past year, and cars are becoming cleaner. Some newer cars could have a lower taxable benefit. It is people driving older cars who will be worst off, because their cars tend to be dirtier and may have cost more then current models, and after 5 April next year the discounted taxable benefit for cars over four years old will no longer apply. Some employers are looking for other methods of providing company cars. These include paying employees to buy or lease their own cars,via personal contract hire arrangements. Any employer or employee faced with replacing a company car should consider the future tax implications of their decision. Most cars bought now, will still be in use in April 2002, and the employee's tax bill (and the employer's National Insurance bill) could vary significantly depending on the car chosen, and how it is provided. The correct course of action to be taken could differ from one car to another and fairly complicated calculations are necessary in each individual case. Interested parties should contact Johnathan Dudley, Partner, on 01922 725590 or email dudleyj@horwathcw.co.uk.
© HORWATH CLARK

ARE DOUBLE-CAB PICK-UP TRUCKS A GOOD WAY OF ESCAPING THE NEW CAR TAX RULES?

Over the last few months, as the new regime for taxation of company cars gets nearer, I am sure that you will have noticed that there are many 'Hi Spec' station wagons on the road. There has been widespread advertising by main dealers of the apparent favourable tax treatment of such vehicles and I have heard stories of Porsches being traded in for Leather upholstered, Automatic, 4 speaker CD stereo, Air Conditioned pickups, with waiting lists for such new vehicles running into the new year.

So just what is the euphoria all about? There are two issues, firstly the possibility of a full recovery of VAT and secondly the treatment of the vehicle as a 'Van' for benefit in kind purposes, limiting the taxable benefit to £500 for the driver and escaping the new CO2 emissions rules entirely. For a vehicle costing, say, £20,000, this amounts to £2978 of VAT 'off the asking price', and also a £2600 tax saving each year to a 40% tax payer! But does the alleged tax dodge actually work? As ever, we have to look at the small print! Unfortunately, Customs & Excise (who collect VAT) have a different definition of cars and vans to the Inland Revenue (who determine benefits in kind) and the opinions of the two establishments don't entirely correspond! Details of each and every vehicle need to be scrutinised and if the model in question does not fall clearly within or outside of the legislation, a ruling will need to be obtained from Customs / the Inland Revenue. Both bodies have so far refused to make decisions in advance, with perhaps only a local exception or two. The situation is complicated further by the variations which the vehicle manufacturers can offer customers at the build stage, and consequently it is difficult to make any generalisations regarding particular models. In summary, it seems that it is going to be a fairly exceptional case where any pick-up succeeds in getting around the definition of a car for either VAT or Income Tax. The situation may become clearer as a result of more and more individual cases being considered by Customs and The Revenue. There are fairly obvious examples of exploitation of the apparent loophole, and we can expect the Treasury to use everything at it's disposal to achieve the spirit of the revised motor vehicle tax rules by testing the position in the courts. The bad news is that to 'Take them on' could prove costly both in respect of time and costs, not to mention tax, interest and even penalties if you are unsuccessful! Rest assured that there will be well advertised announcements from manufacturers and dealers if they are able to obtain any definitive rulings concerning a particular model, as it would clearly provide a terrific boost for their sales. Until then, buyers should proceed with caution and expect to have to seek rulings from Customs and The Revenue on a case-by-case basis and more importantly, not to spend their 'tax savings' until they are confirmed! E mployment Training in Nechells Association The DfES have granted Nechells Employment Resource Centre funding for Employment Training in Nechells Association (ETNA) which is available to employed and unemployed 20-65 year olds living in the area. The aim of the programme is to enhance employability by a) reintroducing clients to training and development - Basic Food Hygiene, H&S, Job Seeking etc. b) Liaising with employers to understand what they need from their workforce. and c) Supplying the training that employers have identified. We realise that several of our clients will need support beyond the job start date and will continue to provide training and support until they are firmly embedded into their job. Businesses wanting further information about the Employment Training in Nechells Association snould contact John Shakespeare or Pete Harrison on 0121 359 4518.
© HORWATH CLARK

Cut Costs and Become More Cost-Effective by Outsourcing.

Small business owners in the UK have the tendency to do everything themselves in an attempt to save money. Sometimes however this is not the most cost-effective solution. Outsourcing some of your secretarial/admin tasks will free up valuable time & money, which is much better spent by servicing regular customers, generating new business or developing a product range.

In the light of recent advances in technology and the ongoing growth of the communications industry, a whole new network of company support services has evolved. One such service is that of the 'Virtual Assistant' or, as they are more traditionally known, Secretarial and Administrative Assistants. Location is of no consequence when utilising such services. A Virtual Assistant based in Birmingham can quite easily provide an ongoing service for a company located in Aberdeen. This of course negates the need to employ extra or temporary office-based secretarial staff during a peak period, as all projects are managed by the Virtual Assistant from her own office using her own equipment etc.

Clearly, the main benefits to companies are a reduction in the cost of employment and a large reduction in overheads and operating costs. Each Virtual Assistant is a professional freelancer, and is therefore responsible for her own tax/holiday & sick pay/pension/training etc. They have many years experience and training, and because they run their own business, will understand the needs more clearly of your own business.

An example of a large company who drastically cut their overheads by millions of pounds is that of British Telecom. Their pioneering Workstyle 2000 scheme enabled them to outsource work originally undertaken by office-based staff. Each desk space they removed saved an average of £6,000 per year! Think what a difference it would make to your company.

For more information & a Free Leaflet on how a Virtual Assistant can support your company cost-effectively, contact Melanie at Dataplus Solutions on 0121 681 8058

or email mel@dataplus-solutions.co.uk. The leaflet also has a free introductory offer for all Heartlands Members.

Written by: Melanie Cowley of Dataplus Solutions. April 2001

Managing the Bank Manager

Thinking about what the bank manager needs can help you to get what you need.

To the owners of many small businesses the bank manager represents high charges and nasty letters. Going to see the bank manager is like a visit to the dentist - nerve racking. And yet it doesn't take much to change all that.

Firstly remember two things, the bank is a business just like yours. They provide a service and expect to be paid for that service. Secondly, the bank manager is an employee of the bank and will have targets to meet.

Banks operate in a very competitive marketplace. Shop around for one that can best meet your business needs. This may not be the one that will lend you the most money. Greater and greater debt is not usually the best way forward. You need a good working relationship with the bank so that the manager can work with you to best asses the needs of your business.

Banks offer a range of services besides loans, overdrafts, cheque books and cash dispensers. Bank employees are supposed to sell these services to meet their targets. So let the bank quote for your business insurance - you don't have to accept their quotation if it isn't the best for you but your manager will be pleased that you gave the bank a chance. The same goes for pensions, asset finance, debt factoring, in fact, all and every business needs related to money. If your manager tells you about a particular service, give it some thought. He or she will be telling you because they have targets to meet and this particular service may just be useful to you. Let the bank quote for anything and everything - it keeps the communication going for when you need it.

Ask for your bank statements to be sent to you on a regular basis, weekly if there is no extra charge. This will convince your manager that you are keeping a watchful eye on cash flow - always a good idea!

Don't issue cheques that will bounce in the hope that they won't. They will and it will cost you lots in returned cheque charges. Look ahead and if it look as though there may be cash-flow problems in the near future, phone the manager and let them know you have foreseen a potential problem. When they are forewarned they are more likely to be on your side.

Invite the manager to visit your business premises for a chat over a cup of tea or coffee. They like to get out now and again and one of their targets will be to visit a certain number of customers per week. Make sure yours is one of them. Informal chats lead to better working relationships and with first hand knowledge of your business the manager is more likely to understand your needs.

The bank wants your business to succeed.
Just think, your business suffers if a customer fails, and the same is true of the bank!



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Hotting up

Glory be, another new tax

Designed to stop businesses making further dents in the ozone layer, the Climate Change Levy becomes law in April 2001. It all started with the Kyoto Agreement (like the Maastricht Treaty, only in Japanese) signatories agreeing to limit carbon dioxide emissions within their borders. As a result, all UK businesses will be charged a levy on their heating bills. Although the aim of the levy is to step up the pressure on evil polluters, all businesses should expect a rise of 15-20% on heating and lighting bills.

It has been suggested, says Horwath Clark Whitehill's Nigel Moore, that most businesses could reduce their energy bills by up to 20% per annum. The legislation is intended to encourage people to switch to low carbon - non coal - technologies or renewable sources of energy.

Ouch !

"The irony is we are actually doing pretty well as a nation in terms of energy efficiency. However, further improvements could clearly be made and, as usual, the UK's answer is to use tax as a weapon". The climate Change Levy is designed to be revenue neutral with no overall benefit to public finances. An Enhanced Capital Allowance (ECA) scheme will provide 100% first-year allowances for energy-saving investments by private sector organisations. £50m has been allocated to provide help and advice for businesses - especially small and medium enterprises - the total package delivering savings of approximately 5m tonnes of carbon per annum by 2010.
"Time will tell if this is just a sop to the environmental lobby," Nigel concludes. "It all goes back to the old argument of whether carbon fuel is what really gives rise to global warming"

Our thanks to Horwath Clark Whitehill for this contribution, visit their web site www.horwathcw.com for the full text of their Business Action publication with information for family and owner-managed businesses. Alternatively contact Jonathan Dudley of Horwath Clark Whitehill on 01922 725590