Business Tax Update – June 2022

May 31, 2022 | Blog

June’s Business Tax Update has lots of updates and changes that business owners need to be aware of. Read on to see what aspects are likely to affect your business.

The following business tax update content is accurate as of 28.04.2022:

Trading losses – carry back or carry forward?

In the March 2021 Budget, it was announced that the normal one year carry back for trading losses would be extended to three years. That means that many businesses that have made losses during the COVID-19 pandemic may be able to obtain a repayment of tax paid in that earlier three-year period. This enhanced carry back applies to unincorporated businesses as well as limited companies and will provide a much-needed tax refund.

However, with the corporation tax rate increasing to 25% from 1 April 2023 for profits over £250,000 it may be more beneficial to carry the loss forward. Note that the marginal rate is 26.5% where profits are between £50,000 and £250,000 a year. So, there is a trade-off between a tax refund now and a possible bigger tax saving in the future.

For the enhanced carry back the company’s the loss-making accounting period must end between 1 April 2020 and 31 March 2022. For unincorporated businesses the trading loss must be incurred in 2020/21 or 2021/22.

For corporation tax purposes, it is no longer necessary to finalise the company accounts and file the CT600 corporation tax return to claim loss relief where the loss is no more than £200,000. HMRC will however require evidence of the loss to process the claim such as management accounts for the period.

Super-deduction for equipment runs for one more year

The 130% super-deduction for companies that invest in new plant and machinery applies where the expenditure is incurred between 1 April 2021 and 31 March 2023. Many companies recovering from the coronavirus pandemic have not had the resources to commit thus far and the war in Ukraine may have made them reluctant to invest until the political and economic situation stabilises. Thankfully the special tax relief announced in the Spring 2021 Budget will be available for expenditure up until 31 March 2023 potentially saving £247 for every £1,000 invested in new equipment.

It is hoped that the current £1 million Annual Investment Allowance (AIA) will continue to be held at that level once the super-deduction ends. Note that the AIA is available to unincorporated businesses as well as limited companies and for second hand as well as new equipment.

Changes to VAT rates from 1 April 2022

Many in the hospitality sector were hoping that the Chancellor would extend the 12.5% reduced rate that has applied since 1 October 2021 but, as scheduled, the rate has reverted to 20% from 1 April 2022.

The increase applies to hospitality, visitor attractions, catering services including restaurants and takeaways.

This has a consequential effect on the VAT Flat Rate Scheme percentages from 1 April 2022 onwards as set out below:

Type of Business From 1 April 2022
Catering services including restaurants and takeaways 12.5%
Hotel or accommodation 10.5%
Pubs 6.5%


End of tax year payroll procedures

As the 2021/22 tax year has now ended, employers need to carry out the following end of year procedures:

  • Provide employees with their P60 annual summaries by 31 May 2022,
  • Prepare forms P11D for employees’ expenses and benefits by 5 July 2022,
  • Update employees’ payroll data for 2022/23, in particular their new tax codes, and
  • Update their payroll software for 2022/23 if they haven’t already done so.

Employers NICs in relation to ex-military staff

Last year the Government announced a one-year exemption from paying employers national insurance contributions (NICs) where military veterans are recruited by civilian employers.

Employers can claim relief from employer NICs for the first 12 months of the veteran’s first civilian job after they leave the military.

For 2021/22 employers had to initially pay the employers NICs and can now claim back the amounts paid.

From 6 April 2022, a new zero NIC rate will apply in these circumstances, and employers should use NIC letter V.

Reimburse private fuel for your company car?

Unless there is full reimbursement of fuel provided for the private use of a company car there is a benefit in kind charge based on a fixed figure of £24,600 which is multiplied by the CO2 emissions percentage that is used to calculate the company car benefit for that vehicle. For a high emission car that percentage can be as high as 37%, resulting in a benefit in kind charge of £9,102 and an income tax bill of £3,640.80 for a higher rate taxpayer. Even with current fuel prices, that would be an awful lot of private mileage, so the employee should consider reimbursing the employer using the HMRC approved mileage rates by 5 July 2022 for 2021/22.

ATED returns and revaluations due

The Annual Tax on Enveloped Dwellings (ATED) was introduced in April 2012 and is charged where certain residential properties are owned within a corporate structure. This tax not only catches UK properties owned by wealthy oligarchs via offshore companies but also applies to UK resident companies. Originally the charge only applied where the value of the property exceeded £2 million but that threshold has been subsequently reduced to £500,000.

The charge for 2022/23 starts at £3,800 and rises to £244,750 where the property value is more than £20 million.

Properties need to be revalued every five years and the latest valuation date is 1 April 2022. With significant increases in property values in recent years this may mean that more companies may be required to complete an ATED return.

There are numerous exemptions and reliefs from ATED but companies still need to submit an ATED Relief Declaration Return.

Main ATED reliefs

The main situations where there is a relief from ATED are where the property is:-

  • let to a third party on a commercial basis
  • being developed for resale by a property developer
  • owned by a property trader as the stock of the business for the sole purpose of resale
  • a farmhouse occupied by a farm worker or a former long-serving farm worker


The following business tax update content is accurate as of 29.5.2022:

Report employee benefits on form P11D by 6 July

P11D forms for reporting expenses and benefits in kind provided to employees and directors in 2021/22 need to be submitted by 6 July 2022.

Remember that reimbursed expenses no longer need to be reported where they are incurred ‘wholly, exclusively and necessarily’ in the performance of the employee’s duties. HMRC do however expect internal controls to be in place to ensure that the reimbursed expenses qualify under these terms.

Note also that non-cash ‘trivial benefits’ that cost no more than £50 do not usually need to be reported. This typically covers non-cash gifts to employees at Christmas and on their birthdays.

Is your business entitled to the employment allowance?

The Employment Allowance (EA) is a £5,000 allowance set against employer National Insurance Contributions (NICs) and has to be claimed each tax year by qualifying employers. The EA was increased from £4,000 to £5,000 this tax year to help to soften the blow of the 1.25% increase in employer contributions, now calculated at 15.05%.

If two or more companies or charities are connected with one another, then only one of them may claim the EA.

Employers are not eligible to claim the EA where their employers’ Class 1 National Insurance liabilities in the previous tax year exceeded £100,000.

Another important exclusion from the EA are single director companies where the director is the sole employee of the company.

Buying an electric car? Does it need to be new?

The shortage of semiconductors has meant long delays in the delivery of new cars. This has caused many company car drivers to choose a second hand car instead, but what are the tax consequences?

Unless the car has zero emissions, the capital allowance rules are the same for new and used cars bought by the business. Plant and machinery capital allowances may be claimed on the purchase price of the car at either 18% or 6%, depending on whether the CO2 emissions for the vehicle are below or above 50g CO2 per km.

Where a zero-emission car is acquired by the business, a special 100% first year allowance only applies to new cars. There is however an exception for certain ex-demonstrator cars. HMRC accept a car is unused and not second hand provided it has been driven for a limited number of miles for the purposes of testing, delivery, and test driven by potential purchasers.

When calculating the P11D benefit of company cars the original list price inclusive of extras should be used, not the purchase price. Hence the P11D value for a second hand company car may be significantly higher than the price paid for the vehicle.

Salary sacrifices – get the timing right

Many employers and employees have been putting in place salary sacrifice arrangements to give up some of their contractual salary in exchange for additional pension contributions or an electric company car. In these specific cases and if correctly structured, the employee is taxed on the lower of the taxable benefit and the salary foregone.

In the case of the electric car the benefit is currently 2% of the original list price. There is no taxable benefit on employer pension contributions.

When the director or employee enters into the salary sacrifice arrangement, they must agree with their employer to vary the employment contract well in advance of the date when the first payment under the new arrangement is due to be made. If the contractual changes have not been completed by that date, the terms of the previous contract continue to be in force.

This means that the employee is still entitled to receive, and is therefore still taxable on, the previous higher salary, even though the smaller, post- sacrifice amount is paid.

Advisory fuel rate for company cars

Unbelievably there were very few changes to the HMRC advisory fuel rates from 1 March 2022, which may not have been your experience at the filling station!

Now that the increased prices have fed through into the HMRC calculations there are some significant increases from 1 June 2022, as set out in the table below.

In cases where the employee pays for the car fuel, these mileage rates should be used by the employer to reimburse the employee for business journeys.

In cases where the employer pays for the car fuel, these mileage rates should be used by the employee to reimburse the employer for private mileage, if they want to avoid a fuel benefit in kind arising.

Engine Size Petrol Diesel LPG
1400cc or less 14p

(13p)

9p

(8p)

1600cc or less 13p

(11p)

1401cc to 2000cc 17p

(15p)

11p

(10p)

1601 to 2000cc 16p

(13p)

Over 2000cc 25p

(22p)

19p

(16p)

16p

(15p)

Where there has been a change, the previous rate is shown in brackets. The previous rate can continue to be used until 30 June 2022, if so desired.

Note that for hybrid cars the appropriate petrol or diesel rate should be used.

If you have any questions relating to the above business tax-related topics, don’t hesitate to get in touch. You can contact us here.

Let’s connect

If you like the sound of a friendly local accountant who understands the challenges you face, with a relentless focus on efficiency and consistency, we should talk sooner rather than later. We can’t wait to learn about your business and start sharing ideas.

Xero Silver partner logo
ACCA logo