Tax e-News June 2023

The deadline for reporting shares and securities and share options issued to employees for 2022/23 is 6 July 2023. This is the same as the deadline for reporting expenses and benefits provided to employees on form P11d for 2022/23.

Employers must submit their employment related securities annual returns online and attach the appropriate spreadsheet template if they have something to report. HMRC provide templates on their website that may be downloaded in order that the information may be entered and uploaded. Note that there are different templates for each of the four tax-advantaged employee share schemes – Company Share Option Plan (CSOP), Enterprise Management Incentives (EMI), Save and You Earn (SAYE) share options and Share Incentive Plans (SIP). In addition, spreadsheet 42 should be used to report any other employment-related securities (non-tax-advantaged) issued to employees and directors.

We can of course assist you with the completion of the reporting obligations and with the valuation of the securities concerned.

HMRC have announced that the official rate of interest will increase from 2% to 2.25% on 6 April 2023. The official rate of interest is used to calculate the income tax charge on the benefit of employment related loans and the taxable benefit of some employment related living accommodation. These rates used to fluctuate in line with the base rate, but in recent years HMRC has fixed the rate for the whole tax year.

For those employers including beneficial loans on form P11d for 2022/23 the average official rate to be used is 2%. The charge applies where the amount of the loan exceeds £10,000.

The HMRC rate of interest on beneficial loans looks very attractive compared to the Bank of England Base rate of 4.5% and much higher rates charged by banks for unsecured loans.

Note that where loans are made to participators (broadly shareholders) of a close company there is potentially a special tax charge on the company on any loan still outstanding 9 months after the end of the accounting period. The charge is currently 33.75%, the same as the higher rate of tax on dividend income. This tax charge is only repaid to the company when the loan is repaid or written off.

For example, Fred, the managing director and controlling shareholder of Bloggs Ltd, is loaned £100,000 interest free on 6 April 2023. No repayments are made in the year ended 31 March 2024.Assuming no change in the HMRC official rate of interest the company would show a taxable benefit in kind on Fred’s 2023/24 P11d of £2,250 (2.25%)

If Fred repays the loan in full before 31 December 2024 there would be no special charge on the company although Fred would be assessed on the beneficial loan for the 9 months that the loan was in existence in 2024/25.

Note that there are anti- “bed and breakfast” rules to counteract the situation where the loan is readvanced by the company. The anti-avoidance would not apply where the loan is cleared by crediting a bonus or dividend to Fred’s loan account.

If however only £60,000 was repaid by Fred before 31 December 2024 leaving £40,000 outstanding then there would be a s455 charge on the company of £13,500 (assuming 33.75% continues) which would be payable in addition to the company’s corporation tax liability for year ended 31 March 2024.

The company would show a taxable benefit in kind on Fred’s 2024/25 P11d based on the official rate of interest on beneficial loans for 2024/25 (yet to be determined).

If the company then decides to write off or waive the outstanding loan in year ended 31 March 2025 the £13,500 would be refunded. However, Fred would be assessed on the £40,000 as an income distribution (dividend) arising at the date of waiver in 2024/25.

The table below sets out the HMRC advisory fuel rates that apply from 1 June 2023. These are published quarterly these days due to the volatility in petrol and diesel prices in recent years.  Where the employer provides an employee with a company car there may be an additional benefit in kind on the provision of fuel for private journeys which needs to be reported on form P11d.

This additional benefit is based on a ‘fuel benefit charge multiplier’ of £25,300 for 2022/23 (£27,800 for 2023/24) which is then multiplied by the CO2/km percentage for the vehicle to arrive at the taxable benefit figure.  For example, the Range Rover Evoke S AWD Automatic MHEV has a CO2 emissions figure of 168g/km which gives an appropriate percentage for company car benefits of 37%.  The fuel benefit charge multiplier of £25,300 is multiplied by 37% resulting in a taxable fuel benefit of £9,361.

For a higher rate taxpayer that would result in a tax liability of £3,744.  In many cases this tax charge on the employee will be greater than the cost of the fuel used privately.  In addition, the employer would have a Class 1A national insurance liability of £1,360 (14.53% for 2022/23).  Provided that private fuel is fully reimbursed, the fuel benefit does not apply. This is an all or nothing benefit and unless there is full reimbursement there is an additional taxable benefit.  The deadline for reimbursing private fuel is 6 July 2023 for the 2022/23 tax year.

The table below sets out the HMRC advisory furl rates from 1 June 2023. These are the suggested reimbursement rates for employees’ private mileage using their company car. Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

You can also continue to use the previous rates for up to 1 month from the date the new rates apply. Note that for hybrid cars you must use the petrol or diesel rate. For fully electric vehicles the rate is 9p (8p) per mile.

Where employers reimburse their employees for using their own cars for business journeys the tax – free reimbursement rate continues to be 45p for the first 10,000 business miles and 25p a mile thereafter.  There is also an additional 5p per mile per passenger. These rates have not increased for about 10 years!

Provided the employee provides a fuel receipt from the filling station the employer is able to reclaim input VAT on a portion of the amount reimbursed to the employee. The input VAT is 1/6^th of the advisory fuel rate for the employee’s vehicle. For a 2200cc diesel car the input VAT would be 3.3p per mile based on 20p.

1 June 2023 – Corporation tax payment for the year to 31 August 2022 (unless quarterly instalments apply)

19 June 2023 – PAYE & NIC deductions, and CIS return and tax for month to 5 June 2023 (due 22 June if you pay electronically)

1 July 2023 – Corporation tax payment for the year to 30 September 2022 (unless quarterly instalments apply)

5 July 2023 – Last date for agreeing PAYE settlement agreements for 2022/23 employee benefits

5 July 2023 – Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2022/23

6 July 2023 – Deadline for forms P11D and P11D(b) for 2022/23 tax year. Also, the deadline for notifying HMRC of shares and options awarded to employees.

19 July 2023 – PAYE & NIC deductions, and CIS return and tax for month to 5 July 2023 (due 22 July if you pay electronically)

31 July 2023 – 50% payment on account of 2023/24 tax liability due