UK Tax Alerts
October 2009
Tax appeals from 1 April 2009
VAT and vehicles
Brown Field site develpments
Tax appeals from 1 April 2009
This is a short notice to inform clients that the way in which we will appeal to H M Revenue & Customs, against decisions they have reached on our clients’ affairs has changed from 1 April 2009.
Up to this date appeals were heard by the General or the Special Commissioners.
From the 1 April 2009 these bodies are replaced by a two-tier tribunal system and contentious issues will be referred to these tribunals unless the matter can be resolved by a formal internal review process. See below.
A formal “internal review” of a decision made by H M Revenue and Customs is a statutory right. HMRC are required to take a fresh look at the facts. They will either decide that they were justified in reaching their decision, in which case you will need to use the tribunal system, or their review will find for the tax payer, in which case, job done.
As with all change processes it will no doubt take time for the new review and appeals processes to settle down.
Needless to say we will continue to monitor the effectiveness of the new processes and ensure all our clients affected by the appeals process get a fair hearing.
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VAT and vehicles
New motor cars
Input tax cannot be reclaimed on the purchase of a new motor car that is available for private use. The only exception is if the vehicle is the actual tool of trading e.g. for a car hire business, taxi firm or driving school.
Note - with effect from 1 December 1999 vehicles are no longer treated as cars for VAT purposes if they have a payload of one tonne or more. Payload is the difference between a vehicle’s maximum gross weight and its kerbside weight. In practice the change mainly affects those vehicles generally described as double cab pickups.
If you purchase a genuine pool car input VAT can be recovered if the following conditions apply:
- The car is normally kept at the principal place of business;
- It is not allocated to an individual; and
- It is not kept at an employee’s home
Vans and commercial vehicles
There is no problem claiming input tax on vans and commercial vehicles. But what if a van is partly used for private purposes – let’s say for 20% of the time?
You can either:
- claim 80% of the input tax on the cost of the vehicle at the time it is acquired i.e. to reflect the business use proportion, or
- claim 100% input tax at the time of purchase but then account for output tax on the private use element over a five-year period.
Vehicle Repairs
Even though a vehicle might be used for private purposes, 100% input tax can still be reclaimed on the costs of servicing and repairing the vehicle.
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Brown Field site develpments
The Finance Act 2009 makes significant changes to an existing tax relief and extends it to enable developers wishing to redevelop brown field sites to claim extra tax relief to help with their costs. The relief is only available to companies and is extended to include derelict land as well as contaminated land.
The redesigned land remediation relief grants tax relief of one and a half times the expenditure incurred to encourage developers to concentrate on brown field sites. Developers who incur a tax loss as a result can also claim a refund of tax by surrendering losses for cash.
The expenditure on which additional relief is available is restricted to expenditure on staffing costs, materials and sub contract expenditure, which would not otherwise have been incurred but for the state of the land and the expenditure is not subsidised.
To qualify for relief the land must have been acquired by the claimant company for the purpose of a UK property business or trade.
Land Remediation Relief is not available:
- Where the company, or a party connected to the company, was responsible in any way for causing the contamination or dereliction.
- Where arrangements have been put in place which either create or enhance a claim
- For cleaning up nuclear sites.
Land remediation tax credit - how much do you get?
If a company incurs a loss as a result of land remediation tax relief, a land remediation tax credit of 16% of the amount of the loss may be claimed in the company tax return. The losses will not then be available to carry forward against future profits. The claim will depend on the merits of each case. If cash flow is critical the tax credit might be the best choice even though you are sacrificing future loss relief which might instead provide relief of at least 21%.
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