Pilot’s, Co-pilot’s and Cabin Crew Flat Rate Expenses

29 June 2016

Many employee’s are losing out on valuable tax relief. For many years HMRC has agreed that certain employee’s should be allowed a “Flat Rate Expense” (FRE) for costs incurred in keeping uniforms clean. No receipts are necessary, HMRC periodically update this list and it can be found here.

HMRC recognise that Pilot’s, Co-pilot’s and Cabin Crew may incur greater expenses than other industries and the relief can be worth over 17 times more than for other occupations. A typical basic rate taxpayer who has never claimed the relief could be owed back over £1,000 tax.

In addition to the FRE for uniform cleaning if you have to purchase your own uniform you may also be entitled to tax relief for any subsequent replacement uniform (but not the purchase of the original one). You need a receipt to claim this relief.

Further, if you have to purchase your own noise cancelling headphones as your employer does not supply them then tax relief is available for the replacement cost by making a capital allowances claim. You also need a receipt to claim this relief.

HMRC have agreed that pilots and other uniformed flight deck crew can be given a further expenses deduction (EXP) of £110 per year to cover their expenses of travelling to the following events:

•Medical examinations

•Flight Simulator sessions

•Technical refresher sessions

•Crew resource management training (CRM)

•Emergency and safety equipment training (SEP)

•Fire and smoke training (F&S)

If you incur costs above and beyond the £110 then the actual amount incurred can be claimed as long as you keep the receipts.

Finally, as in common with most other employees, travel and subsistence costs incurred in travelling to a temporary workplace can be claimed as a tax deduction, using receipts and/or mileage details.

If you have not claimed any of these reliefs that you were entitled to in the past you may be entitled to a tax repayment. You must make a claim within 4 years of the end of the tax year otherwise the relief is lost.

You do not need to work directly for the airline to benefit from any of these valuable tax reliefs, if you supply your services through an agency, umbrella or other intermediary then you can still make a claim.

For assistance in making the claim, or claiming back the tax for earlier years please contact us or get in touch today by calling 0203 039 3993.

Benefits in Kind and P11D’s

22 June 2016

Some Businesses provide their employees with more than just financial rewards.They reward them with the personal use of cars or medical insurance for example, these are called “benefits in Kind”.

These benefits are usually taxable and some are also subject to class 1A national insurance. The tax and national insurance contributions (NIC) can be collected through either or a combination of the PAYE system and/or Self-Assessment.

Business expenses that are paid for by the employee and reimbursed later by the employer should be reported to HMRC, but if they were incurred for the employers business then no tax or national insurance charges arises.

HMRC’s guidance on the treatment of various expenses and benefits can be found here.

A form P11D needs to be completed for each employee or director who has received any benefits in kind or had any expenses reimbursed, unless from 2016-17 your employer decided to voluntarily payroll benefits in kind and submit information about your benefits through Real Time Information.

All forms P11D must reach HMRC along with a form P11D(b) which summarises the employers class 1A national insurance liability no later than the 6th July each year and all payments must reach HMRC by the 22nd July.

Failure to complete forms P11D and P11D(b) on time can result in severe penalties.

For late filing of P11D(b) penalties are £100 per 50 employees for each month or part month that is late. This is an automatic fine. Penalties for an incorrect P11D(b) is up to 100% of the NIC payable, this is also an automatic penalty and the level is determined by HMR’s view of your behaviour.

For late filing of P11D penalties are £300 per form and up to £60 per day until submitted. This is a discretionary penalty. The penalty for incorrect P11D is up to £3,000 per form, however this again is a discretionary penalty.

If HMRC has issued you with a form P11D(b) you must complete and return it even if you haven’t provided any benefits or reimbursed any expenses during the year.

For more information or to help you complete and submit your P11D's, please contact us or get in touch today by calling 0203 039 3993.

Let Property Campaign

14 June 2016

The let property campaign is an opportunity for landlords to come forward and declare any past undeclared rental profit voluntarily.

This campaign was initiated in autumn 2013 and since then HMRC have increased the intensity of their enquiry into landlords who have failed to disclose their rental profits.

HMRC are now looking at the land registry and lettings agents have been asked to provide HMRC with details of their landlords. HMRC are also monitoring individual’s bank accounts and profiles on social media to get as much information as they can. This means that landlords cannot stay off the radar forever.

You will need to fill out a notification form (DO1) to let HMRC know that you with to take advantage of the let property campaign. Once acknowledged by HMRC you will have three months to disclose the income that you had previously not told HMRC about using disclosure form (DO2) and to Pay the Tax due, however if you can’t afford to pay the total amount in one lump sum you could ask to spread your payments. It is likely that you may not have to pay any penalties or if you do these will be lower than they would have been if HMRC had found out themselves that you hadn’t declared your rental profits.

It is advisable to seek independent professional advice to assist you in working out the total rental income for each year that has not previously been declared to HMRC, you also need to calculate all the allowable expenses to work out your total profit for each year.

If your records are incomplete you would have to make your best estimate of the undisclosed income and expenses, you will need to keep record of your estimated calculations as HMRC may ask you to explain how you have calculated the profit figures.

TT Intelligence can help you with taking advantage of the let property campaign and bring your tax affairs up to date with minimum possible penalties please contact us or call us on 0203 039 3993.

Finance Cost Restriction Unfair

08 June 2016

In the summer budget 2015 the Chancellor announced he was to make the tax system fairer by restricting the tax relief available for landlords on their finance costs for residential property to the basic rate of tax, currently 20%. This will not apply to corporate residential landlords.

Initially many landlords may have dismissed this out of hand as they may be basic rate taxpayers and therefore assume this does not apply to them, this is a risky assumption.

The change is being phased in gradually from April 2017, during 2017/18 75% of the finance costs will be allowed tax relief in full under the existing rules, dropping to 50% in 2018/19, and 25% in 2019/20. The new tax relief will be phased in correspondingly. From 2020/21 onwards the new rules will be fully implemented.

The new rules mean that landlords will no longer be able to reduce their taxable property income using their finance costs, however their tax liability will, in most cases, be reduced by an amount of up to their finance costs multiplied by the basic rate of tax.

The following table shows the calculation of tax from 2016/17 to 2020/21:

As you can see the increase in tax from the current system to the new turns an economic profit into an economic loss in this scenario, a basic rate taxpayer is now paying an effective rate of 110% tax on their actual economic profit of £3,000. 

This result gets worse as your economic profit gets lower, the following example shows a higher rate taxpayer.

There are complex rules which may mean the basic rate relief is restricted, and the interaction with the High Income Child Benefit Charge must not be overlooked.

The rules will often change an economic profit into a loss after tax, reducing the return on investment on property income significantly.

If you would like a review of how the new rules will impact you and a discussion about your options please contact us or get in touch today by calling 0203 039 3993.

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