Brexit tax, commercial vehicles and off payroll working

Settled Status’ for EU citizens

The government recently announced a new ‘settled status’ for EU citizens post-Brexit. According to the Home Office, settled status will be available for all EU nationals who have lived in the UK for five years prior to 31stDecember 2020.

The Home Office has placed the emphasis of applying for settled status firmly with the individual, however businesses should keep up to date on this issue. This is particularly important for industries that tend to have a higher concentration of EU workers – the private hire industry being a prime example.

For operators, it may be a good idea to explain certain aspects of the application process to sub-contractors that are affected by this. I still believe that most companies value EU citizens within their organisation and will encourage them to stick around. However, a definite no, is that under any circumstances operators should never complete applications on behalf of contractors.

The decision to remain in the UK will be deeply personal for most individuals. Not everyone will wish to apply and we should keep this in mind and avoid punishing or discriminating against those who choose not to.

Thankfully, the settled status appears to be one aspect of Brexit that is universally agreed upon. To deal with queries a concise response should be prepared which offers practical guidance whilst ensuring the responsibility remains firmly with those affected.

Commercial Vehicles?

Many people have asked me why claiming VAT back on their vehicle often attracts the attention of the HMRC (not in a good way)

Today’s lesson is about what the HMRC knows or ‘thinks’ it knows about your hire and reward vehicle. According to their guidelines; whether your vehicle is a car, or a commercial vehicle is the starting point for decidingif input tax is recoverable.

According to the HMRC, the basic VAT definition of a car, is that it is:

  • a vehicle used on public roads that has three or more wheels
  • is either constructed or adapted solely or mainly for the carriage of passengers
  • has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows

This definition may lead us to the conclusion that even the good old double cab utility vehicle will be a car for VAT purposes.

However, the legislation further defines what is NOT a car:

  • A vehicle constructed to carry a payload of one tonne or more is not a car for VAT purposes
  • if the unladen kerbside weight of the vehicle is three tonnes or more this excludes it from the definition of a car

Input tax recovery on a car is blocked unless:

  • it is stock in trade for a manufacturer or dealer, or
  • it is intended to be used primarily as a taxi,(Note: does not mention private hire vehicles although I would fight to the death to widen my interpretation of this) driving instruction car, or self-drive hire car, or
  • it will be used exclusively for business purposes and would not be made available for the private use of anyone. (A big factor for the chauffeur and circuit driver)

It is still the case that input tax on a commercial vehicle purchased by a business can be recovered, even if there is an element of private use. If there is private use of the vehicle as well as business use, then the you have a choice to:

  • apportion the input tax recovered at the outset; so what is recovered equates to the anticipated business use proportion, or
  • recover the input tax in full at the time of purchase and then account for output tax on private use each quarter. .

If using apportionment at the outset, the taxpayer needs to be able to demonstrate how he arrived at the proportion used, which must be fair and reasonable.

Latest Tax news

Off-Payroll Working

In the Autumn 2017 Budget, the government announced a consultation on how to tackle non-compliance with ‘off-payroll working’ rules in the private sector – more commonly known as IR35. The consultation closes on 10thAugust and reforms to the rules may follow – potentially placing further burdens on businesses in the form of extra administration and possible tax responsibilities. This may be impacting on our trade. Watch this space.

— Gary