08.06.2009

Car scrappage scheme launched. Minimum wages and tips - HMRC ruling.

CAR SCRAPPAGE SCHEME LAUNCHED
Both private and business purchasers of cars and light vans can now take advantage of a temporary scrap allowance of £2,000 given against the disposal of cars and light vans over 10 years old in exchange for the purchase of a new model. The allowance is funded 50% by Government funds and 50% by participating motor manufacturers. The treatment of the allowance due for direct tax and VAT purposes is quite complex, but guidance has been issued to the industry. There was an initial problem with the treatment of VAT on affected transactions, but this has now been clarified. For the business purchaser, the allowance is treated as a reduction in the cost of the new vehicle, rather than the proceeds of the old vehicle, so no tax charge arises immediately on the £2,000, it merely reduces future tax relief on the vehicle purchased. The conditions for the scheme are available from participating dealers and from the BERR website at
http://www.direct.gov.uk/en/Motoring/BuyingAndSellingAVehicle/AdviceOnBuyingAndSellingAVehicle/DG_177693

MINIMUM WAGE AND TIPS
Many restaurants and bars operate an arrangement under which tips are collected together and distributed between staff, independent of the employer. When this is done, the payments are not made by or on behalf of the employer, and no tax or National Insurance Contributions are deducted on the gratuities. The arrangement is known as a tronc arrangement. However, where an independent tronc arrangement is in operation, the employer cannot then claim that the payments the employees receive form part of their pay for minimum wage purposes. HMRC took Annabel’s nightclub and others to court to establish this point, as the appellants believed the reverse. Under certain circumstances tips can form part of minimum wage, but this Court of Appeal decision excludes cases where an independent tronc is operated.