Thomas Dickson at Essential Money  has created this guide for dentists in all stages of their career – Whether working as an associate or running your own practice, there’s sure to be something of interest amongst the 106 ideas in this guide.

Browse to www.essentialmoney.co.uk/106 for your free copy! (Have your GDC Number ready)

A recent parliamentary debate raised the question of mileage allowances paid to volunteer drivers. For example, in rural areas voluntary bodies organise transport to outpatient clinics etc. – The service being provided by volunteer drivers, using their own cars, who are paid a mileage allowance. It was generally understood that if the allowance paid exceeds HMRC’s ‘approved mileage allowance payment’ of 40p a mile (25p a mile for more than 10,000 miles a year), a tax charge will arise, but the actual cost of running the volunteer’s car often exceeds these rates. This was acting as a disincentive for volunteers. 

Clarification has been recieved from Exchequer Secretary to the Treasury, Angela Eagle: 

“Volunteers are entitled to claim their actual motoring costs, if they so wish. To do so, volunteers merely have to collect the information about the mileage they have covered and the costs they have incurred. If they do that, HMRC will not tax them on reimbursements – as long as they do not make a profit on the money that they claim back. They can be reimbursed for their actual costs of driving with no tax consequences whatever – and that is beyond the level specified by the approved mileage allowance payments.”

The general rule is that an employee has to pay tax on every benefit provided by his employer. However, a rather eclectic assortment of benefits has been exempted from tax, usually for policy reasons that have now been lost in the mists of time.

It is feasible for most of the tax-exempt benefits to be provided by small employers as well as large. For example, it is well-known that there is no benefit-in-kind charge on meals provided in canteens or staff dining rooms. What is not so widely appreciated is that the legislation does not require the employer to operate his own catering facility: he can arrange either for his employees to use a canteen or staff dining room operated by a nearby, unrelated enterprise; or for food to be delivered to his own premises by outside caterers. The main condition is that broadly the same facilities must be made available to all employees (or at least, to all employees working at the same site).

Another possibility is free or subsidised transport to and from work in a coach or minibus, or lunchtime trips to local shopping centres, etc. The employer need not own his own vehicle – he could for example buy in the service from a local coach company, or enter into a cost-sharing arrangement with another local employer.

However, most people will probably prefer to drive to work and the provision of car parking spaces at or near the workplace is also free of tax. It is sometimes assumed that the exemption applies only where the vehicle is parked on the employer’s premises (the ‘company car park’), but in fact it applies equally if the employer has to pay for the parking space, for example in a nearby multi-storey car park. And whereas the exemption for a coach or minibus service applies only if the facility is ‘available generally to employees’, workplace parking is exempt even if the employer offers it only to selected individuals. It is rumoured that the exemption for workplace parking was born when some Tax Inspectors were threatened with a benefit-in-kind charge for parking their cars on Government premises – but it is only a rumour.

The employer can also provide the use of a mobile phone – including line rental and call charges – without triggering a tax charge. This is so even if there is no business use of the phone. The main point to watch here is that it would be sensible for the employer to impose some ceiling on the call charges he is willing to pay, as unrestrained use of a mobile phone can be alarmingly expensive.

Next, it is common practice for employers, especially in Central London, to offer interest-free season ticket loans. No tax charge arises on the benefit of being able to borrow the money interest-free, unless the amount outstanding exceeds £5,000. What is less well known is that the same tax exemption applies to loans for any other purpose, provided the sum total of all loans to the individual employee does not exceed £5,000. The disadvantages from the employer’s point of view are, of course, that it is an expensive benefit to provide, in cash flow terms, and even if repayments are deducted from salary, there is always the risk of default. The employer needs to be sure that the loan is within the employee’s financial comfort zone.

Finally, if there is no specific exemption, the general rule is that the tax charge on a benefit-in-kind is based on the cost to the employer of providing that benefit. Sometimes it is possible to provide worthwhile benefits at no cost to the employer. For example, he may be able to arrange for discounts for employees at gyms and other local facilities, or access to cash-and-carry warehouses.

All the exemptions are subject to complex terms and conditions – Accordingly, if you are planning to provide any benefit-in-kind or facility for employees, we strongly recommend that you discuss, with us, the most tax-efficient way of providing it, before committing yourself to any expenditure.                                                                                                                  

You may recall driving past the Eastbourne Humphrey & Co offices earlier this year and seeing a maze of scaffolding! The building work is coming on well, the scaffolding is all down and the front of the building now a duck egg blue. We thank our clients for their continued patience during this upheaval and look forward to greeting you into our renovated offices in the Autumn.

Please remember that the car park at the back of the building is still operational but there is no direct access to the building from the car park. You now need to walk from Avenue Lane to the main entrance in The Avenue. If you would prefer us to visit you at home or at your business premises we will be happy to do so.

At Humphrey & Co we recommend to all our clients the use of cash ISAs as all interest received  is tax free. From 6 April 2008, the maximum amount that can be invested in an ISA has increased.  The overall limit is £7,200 each tax year, with a maximum of £3,600 that can be invested in a cash ISA. The balance of the £7,200 can be invested in stocks and shares.

An investment of £3,600 each by a husband and wife over a ten year period can result in a nest egg of £72,000 producing income tax free.

Employers will shortly receive details from HMRC of what they can do to get ready for the tax code changes which will be required for many individuals following the Chancellor’s announcement in May.

 The Chancellor announced that the basic personal allowance is increasing by £600 from £5,435 to £6,035 and the basic rate limit is reducing from £36,000 to £34,800. The new tax codes and rate bands must be used from the first payday on or after 7 September 2008.

HMRC will be writing to all employers advising that they can get ready in good time by:

• making sure that for every employee they have a P11 Deductions Working Sheet (P11) or equivalent record;
• applying any tax code changes that they get dated 23 August or earlier; and
• changing the existing tax codes following the last payday on or before 6 September in line with the instructions provided in the letter.

HMRC are updating their website so that all the relevant tools, tables and guidance that employers use will be at their finger tips come September.

Employers will also get a revised Employer CD ROM along with Employer Bulletin issue 30 in August.

Please do not hesitate to contact a member of the team here at Humphrey & Co should you have any queries or problems when the time comes to make the required tax code changes.