Mobile phones & company tax Mobile phone

Mobile phones & company tax

Mobile phones have become increasingly important both in and out of the workplace. With more features than ever, if used properly they can effectively act as little mobile offices. Many employers know that providing mobile phones as part of employee salaries can be tax-efficient, with their provision being both a tax and national insurance-free benefit. Here we outline some strategies to get the most rewards at minimal cost.

For many years company mobile phones (or SIM cards) for employees have been a tax-free benefit. In 2006 the exemption was limited to one mobile phone provided to each employee for private use and specifically excluded the employee’s family and household. In 2012 HM Revenue & Customs (HMRC) decided that smartphones were technically mobile phones rather than computers and thus potentially qualified for the mobile phone exemption.

The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone.

One of the key requirements in order to qualify for tax exemption is that the mobile phone contract must be in the company name. This means employer reimbursement for personal mobiles does not count, nor does simply adding the company name and address to the invoice of a personal phone.

There is no taxable benefit on an employee if an employer reimburses them for the cost of any business calls made on their personal mobiles.

Limited contracts

To make sure employees do not excessively use their mobiles to the point where it becomes too expensive for the business, consider a limited contract with a set number of free call minutes per month. Should an employee exceed their limit, the business can request them to pay back any additional charges.

Any reimbursements they make will, however, come from their net pay. One way around this is to set up an employee salary sacrifice scheme for mobile phones, although the administrative burden of setting this up may make it an unattractive option.

Salary sacrifice

While salary sacrifice is not a tax-free benefit in kind, it may be another option to consider since it can help reduce employee tax and national insurance contributions (NICs). Much like salary sacrifice for pensions, an employee chooses to give up the cost of the mobile phone contract from their salary. This means no cost for you and an increase in net pay for the employee.

Current income tax and NIC levels mean salary sacrifice offers a saving of £32 for every £100 spent for basic rate taxpayers. This figure is £42 for higher rate taxpayers. This may prove to be enough of a benefit for your employees.

Salary sacrifice arrangements are effective when the contractual right to cash remuneration has been reduced. So, for example, the employee does not have the right to give up the benefit and revert to the original salary at any time. This does not stop employers and employees reviewing and adjusting the contractual arrangements at a later date.

ABG joins forces with Auerbach Hope We a

ABG joins forces with Auerbach Hope

We are delighted to announce that we have joined forces with fellow London-based firm Auerbach Hope. Auerbach Hope like Arram Berlyn Gardner, serve SME’s and high net worth clients across many industry sectors.

The Auerbach Hope team have moved to our office in City Road but have retained some West End meeting facilities for convenience. Auerbach Hope will now trade under the ABG name.

This merger will enable the enlarged practice to continue to provide imaginative and proactive services to our clients with the expertise you would expect of a large firm but with the care and attention of a smaller one.

Pension Reforms explained It’s been ove

Pension Reforms explained

It’s been over a year since the Chancellor first announced reforms to how people can access their pension savings. We look at what you need to know about the changes:

Flexibility in retirement

From this April, people aged over 55 will be able to take their defined contribution pension funds in multiple cash lump sums. The first 25% of your pension will remain tax-free and the rest will be taxed at your marginal rate. No tax will be charged if you withdraw less than the annual personal allowance.

Independent guidance

Retirement savers will be able to access free and impartial guidance from The Pensions Advisory Service and Citizens Advice, under the guise of Pension Wise, from April 2015. Guidance will be available online, via telephone or at face-to-face meetings.

Inherited pensions

The 55% tax charge on inherited pensions will be abolished from April 2015. Instead, individuals will be able to transfer defined contribution pension pots tax-free to a chosen beneficiary when they die. Whether or not the beneficiary will pay tax will depend upon the owner’s time of death:

if they die before 75: the funds will be transferred tax-free and the beneficiary will pay no tax if they die after 75: the beneficiary will pay income tax at their marginal rate.

If you would like to discussion your retirement options with us please contact us on 020 7330 0000.

New ISA to help first time buyers A new

New ISA to help first time buyers

A new type of ISA will provide a financial boost to people saving to buy their first home, the Chancellor has announced during his 2015 Budget statement.

For every £200 deposited into a Help to Buy ISA, the government has pledged to boost it by 25%. This means that first time buyers will receive £50 for every £200 they save towards their house.

There will be a maximum savings limit of £12,000 which would result in account holders receiving a savings bonus of up to £3,000.

Key information:
there is no minimum monthly deposit amount
the maximum monthly deposit amount is £200
account holders will be able to make a £1,000 initial deposit
accounts are limited to 1 per person rather than 1 per household.

Accounts will be available from autumn 2015 and will be open to first time buyers over 16 years-old.

Budget 2015 – Highlights

Budget Highlights

  • Income tax personal allowance to reach £11,000 by 2017
  • ‘Radical’ business rates review before 2016 Budget
  • New Personal Savings Allowance from April 2016
  • Digital tax accounts to replace annual tax returns
  • New Help to Buy: ISA for first time buyers
  • Increased flexibility for cash ISAs from Autumn 2015
  • Rules on annuities to be relaxed from April 2016
  • Pension lifetime allowance to fall to £1m from April 2016

If you wish to download our full 2015 Budget Report please visit our website

Social investment tax relief The social

Social investment tax relief

The social investment tax relief (SITR) offers investors upfront tax breaks and capital gains tax exemptions, similar to those given for buying shares in Enterprise Investment Schemes (EIS). Potentially you could reclaim one or more of the following, subject to various conditions:

Income tax relief: This is available at 30% of the amount you invest. There is no minimum investment limit but the maximum annual limit is £1 million.
Capital gains hold-over relief: You can defer payment of tax on a capital gain if the gain is reinvested in shares or debt investments that would also qualify for SITR income tax relief.

Capital gains disposal relief: If you’ve had income tax relief on the cost of your investment, and you dispose of your investment after you’ve held it for at least three years, any gain you make on your investment is free from capital gains tax.

SITR will be in place for investments made, or capital gains arising, in the period from 6 April 2014 to 5 April 2019.

It is available for investments by individuals (but not companies or partnerships) in ‘Social Enterprises’. In essence, the company or organisation in which the investment is made must provide services for the ‘benefit of society’, such as housing, community transport, youth organisations, sporting facilities or healthcare, so typically they will be charities or community benefit companies.

The Social Enterprise need not necessarily be in the UK, and there is no defined list of what qualifies, however there is a list of activities that do not qualify. The good news is that if you are an investor you will not need to worry about judging whether the recipient of your investment meets the conditions, because any organisation offering SITR qualifying investments to the public should have already gone through an HMRC clearance process in order to be able to do so.

This process has only been available to social investment organisations since July 2014, so the options for investment are currently limited, but the numbers are expected to grow.

When you make an investment, the Social Enterprise will give you a Compliance Certificate in respect of your investment in it, confirming they have met the conditions. You won’t be able to claim for any of the tax reliefs without such a certificate.

None of the reliefs is available if you have had relief for the investment under the EIS, the Seed Enterprise Investment Scheme or Community Investment Tax Relief.

There are numerous qualifying conditions and complications, so professional advice is essential. If you would like to discuss with us your eligibility to claim SITR please contact us on 020 7330 0000

New rules on overtime and holiday pay Em

New rules on overtime and holiday pay

Employers are being advised to review their employee holiday pay arrangements, following a recent landmark Employment Appeal Tribunal ruling that overtime should be taken into account when calculating holiday pay.

The ruling

Until recently, it was generally considered that only basic pay and overtime that was guaranteed to be paid counted for the purposes of calculating holiday pay. However, the Tribunal found that under the UK Working Time Regulations (WTR) holiday pay must also include pay for non-guaranteed overtime.

The ruling applies only to non-guaranteed, compulsory overtime – ie, overtime which an employee is contractually required to work but which the employer does not promise to offer, as opposed to overtime that is undertaken voluntarily.

The ruling applies to the first four weeks of holiday in a given holiday year, as provided under the EU Working Time Directive, and does not take into account any additional holiday provided under the WTR or an employee’s contract of employment.

The likely impact

Up to five million people currently work overtime in the UK and the ruling could potentially impact on many businesses. While it may yet be referred to the Court of Appeal, experts believe that the underlying principle is unlikely to change.

Furthermore, following the ruling businesses could also be vulnerable to claims for additional holiday pay to cover previous periods of compulsory overtime, although the Government has since announced new rules meaning that from 1 July, holiday pay claims can only be backdated for a period of two years. Until that date, workers will be able to make claims under the existing arrangements.

This is not the only case on holiday pay that has found its way to the courts. A recent European Court decision held that commission payments constituted an intrinsic link to an employee’s tasks he was required to perform. The payments therefore should also be included when calculating holiday pay.

Protecting your business

In the light of these recent rulings, business owners are advised to review their holiday pay arrangements with a view to minimising the potential financial impact of the changes. Some of the steps you may wish to consider taking could include:
making appropriate adjustments to ensure that compulsory overtime is included in calculations for holiday pay
considering the potential impact of any potential claims for past unpaid holiday
reviewing employment contracts to allow for voluntary overtime, as opposed to non-guaranteed overtime employing alternative staff resources, such as agency staff, to cover overtime needs.

This article is for general information only and you are advised to seek professional guidance before taking any action.