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Correspondence from Taxation readers on the benefits in kind of electric and hybrid vehicles and the VAT annual accounting scheme.
Electric cars
I read the article ‘Let’s switch over’ (Taxation, 11 February 2021, page 12) with interest. This is a good focus of the significant benefits to the employee, but we should also consider the added cost of buying or leasing electric and hybrid vehicles against a conventional petrol or diesel-engined motor car. This is a major factor for employers – especially in these difficult times. Further, the leasing costs of an electric vehicle are often significant compared to a conventionally powered vehicle given the lessor’s cautionary approach to the end of term value of electric cars because this technology is ever-changing. This means the whole life cost of the vehicle for the employer is expensive.
There are similar issues for hybrid cars. In addition, the fuel costs of these are often more than those incurred on a similar conventional vehicle making the running costs greater.
Alastair Kendrick.
VAT annual accounting
I have used the VAT annual accounting scheme for … I cannot remember how many years. I know this is a minority pastime, but I have always liked it: one return a year, regular payments, and a small cash flow advantage if business is growing. On the rare occasions I have had to ring the HMRC team that deals with it, they seem delighted to talk to someone, and are very helpful. As an added bonus, I was able to defer joining making tax digital (MTD) until all the ‘normal accounting’ people had tested the water for me.
Every year, I receive a letter in February telling me that I am once again authorised to use the scheme for the next return period of 12 months to 30 November, and confirming the monthly payments that are due from the end of March to the end of November. I happened to read the whole of the latest such letter, and I realised that I have not looked at it properly for many years – nor, it seems, has anyone in HMRC.
It is a short letter with five paragraphs and a closing line inviting any questions. The first paragraph tells me that I can use the scheme again, the second tells me the amounts and dates of the payments on account, and the third paragraph – in bold – tells me that my direct debit continues in force, so I need take no action.
The fourth paragraph says: ‘You will be issued with a VAT return at the end of the accounting period which you must complete and submit with any balance owing by the due date shown on that return.’ Never mind the late admission of annual accounting scheme users to MTD, this statement was out of date when the electronic filing of returns and electronic payment of balances became mandatory.
The fifth paragraph, though, is the best. I have checked back to last year’s letter and I see that it is the same; I presume that it has been the same on the past 17 or 18 letters, and I have never, ever noticed. It reads: ‘The frequency and calculation of interim payments under the annual accounting scheme changed on 25 April 2002. If you were using the scheme before that date, you may notice a change. Further information about these changes can be found in Notice 732.’
In fact, there is no information about ‘these changes’ in the notice – it recognised, some years ago, that ‘the current rules’ have been in force so long that there is no need to refer to anything else – but no one has told the computer that sends the annual authorisation letters.
Mike Thexton, Thexton Training Ltd.
