09
May

Progress made towards one-day cheque clearance

A new system that allows UK banks and building societies to scan cheques and clear them digitally rather than using the paper cheque for clearing is expected to be introduced from October 2018. The Image Clearing System (ICS) for cheques will cut down the clearing times from up to six days to just one day.

The changes will facilitate more banks offering their customers the opportunity to pay in their cheques electronically using banking apps. There had been moves to try and phase out the use of cheques altogether, but research found that cheques are still widely used especially by older people and in certain sectors of the economy.

In November 2017, HM Treasury consulted on proposals to make provision for two measures to support the introduction of the ICS. These measures seek to ensure that the introduction of the ICS will have no detrimental impact on existing cheque users.

The first measure will allow for a copy of a paid cheque together with other relevant information to be provided to the payer upon his or her request, and that the copy can be used as evidence of payment.

The second measure will ensure that if a customer paying using a cheque incurs a loss in connection with the presentment of a cheque under the ICS (that did not result from gross negligence or fraudulent activity on their part), and has not received compensation, the payee’s bank must compensate this customer for this loss. Whilst the current system achieves a similar result, the government was keen to ensure that the necessary legislation is in place to ensure this is the case for cheques cleared using the ICS.

 

 

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Employers can claim back VAT from mileage claims

HMRC operates a simplification measure that allows businesses to claim back VAT from mileage claims using a standardised scale charge to value fuel costs for private use. The scale charge is a fixed amount based on a vehicles CO2 rating.

Most businesses, particularly small and medium sized businesses, which do not keep detailed mileage records covering all journeys, use the road fuel scale charges scheme. This measure saves business car users the chore of keeping detailed records of actual private mileage.

Where the scale charge is used, a business can reclaim all the VAT incurred and then pay the appropriate fuel scale charge for each vehicle. The charge is calculated on a flat rate basis according to the carbon dioxide emissions of the car.

The VAT road fuel scale charges are updated annually. The latest valuation table sets the VAT scale charges for taxing private use of road fuel from 1 May 2018 to 30 April 2019. The new fuel scale charges must be used by companies from the start of their next prescribed accounting period beginning on or after 1 May 2018. The fuel scale rates encourage the use of cars with low CO2 emissions.

Planning note:

If a vehicle is used only for business use, all the VAT on fuel costs can be recovered. HMRC will expect to see proof that there is no private use of the vehicle in question.

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