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03 June, 2024

HMRC has cut advisory fuel rates for users of company electric vehicles

03 June, 2024

Andrew Davis – Davis & Co

HMRC has cut advisory fuel rates for users of company electric vehicles, while petrol and diesel rates increase

The advisory fuel rates that apply from 1 June 2024 have gone up for petrol and diesel engines by between 1p and 2p per mile, while LPG rates remain unchanged.

The previous rates, effective from March 2024, can be used for up to one month from the date the new rates apply.

The rates only apply in the following circumstances:

reimburse employees for business travel in their company cars; or
require employees to repay the cost of fuel used for private travel.
These rates cannot be used in any other circumstances. If the rates are used, it is not necessary to apply for a dispensation to cover the payments made.

From 1 June 2024 the advisory electricity rate for fully electric cars will be cut to 8p per mile from 9p. In line with advisory fuel rates, this electric rate is now being reviewed quarterly.

When employees are reimbursed for business travel in their company cars, HMRC will accept there is no taxable profit and no Class 1A national Insurance to pay.

Advisory fuel rates from 1 June 2024
Engine size

Petrol – amount per mile (previous)

LPG – amount per mile (previous)

1400cc or less

14p (13p)

11p (11p)

1401cc to 2000cc

16p (15p)

13p (13p)

Over 2000cc

26p (24p)

21p (21p)

Engine size

Diesel – amount per mile (previous)

Up to 1600cc

13p (12p)

1601cc to 2000cc

15p (14p)

Over 2000cc

20p (19p)

Hybrid cars are treated as either petrol or diesel cars for this purpose.

HMRC reviews rates quarterly on 1 March, 1 June, 1 September and 1 December.

[Thursday 16:08] Andrew Davis – Davis & Co

These schemes were clearly at risk “In the latest saga in the Eclipse tax avoidance scheme, over a hundred investors have lost a claim against HSBC at the High Court

A group of 152 claimants took HSBC to court on the basis that they invested in the Eclipse scheme after relying on information that ‘the structure of the Eclipse scheme had been approved by a tax QC’ [Jonathan Peacock]. They argued that these representations turned out to be ‘false’, with the ultimate scheme being ‘materially different from the structure that was the basis of the QC’s advice’.

The claimants said these representations were ‘deceitful’ and that ‘HSBC knew, intended and was actively involved in all this, in the person of its employee, Mr Neil Bowman’.

The Eclipse scheme with Future Films was originally devised in 2005 and a deal was signed with Disney to fund a number of films.

It was designed to enable individual UK taxpayers to defer their tax liabilities for several years, by investing in limited liability partnerships (LLPs) associated with the film industry.

HMRC always maintained that the scheme was tax avoidance and this was successfully challenged at various tax tribunals, then in the Court of Appeal, with unanimous agreement that the Eclipse LLPs were not trading and/or were not doing so with a view to profit, and should be closed.

As a result, the Eclipse investors were unable to defer their tax liabilities. They suffered losses because of this, which they sought to recover from HSBC.

In the High Court judgment, there is a great deal of information about who was investing in the scheme, their level of exposure and the range of advisers involved.

One of the primary creators of the avoidance scheme was a chartered accountant and former EY partner, Neil Bowman, who worked at HSBC Private Bank (UK) Limited.

At HSBC, Bowman was responsible for creating and originating tax-advantaged structures for high net-worth individuals and corporates.

An estimated 750 individuals invested around £2.3bn of capital in Eclipse including chartered accountants, partners at Big Four firms, finance directors at FTSE companies and bankers at top City institutions. There were even police officers, doctors and dentists, enticed by the tax deferral advantages.

One of the central aspects of the scheme was that individual investors could borrow up to 97% of their capital contribution.

This meant many only made a small initial investment, and the majority obtained loans from HSBC to supplement their investment, the interest on which was to be covered by the eventual return on their film exploitation rights investment.

The High Court judge, Mr Justice Wright stated: ‘I find it extremely unlikely that anyone involved in preparing these instructions in fact expected that any investors would invest without using the loan facility.

‘The attraction of the scheme was tax deferral. This could only be achieved by dint of the accounting losses that individual investors would incur by taking out loans.

‘Without a loan and the liability to pay interest on that loan, an investor would not be able to defer any tax. That would have made participation pointless. In fact, every investor took the maximum loan available. I do not believe that this can have surprised anyone.’

On the issue of deceit, the High Court judge ruled: ‘I cannot accept the case that there was deliberate concealment by HSBC, or the deliberate commission of a breach of duty’, adding that the claimants should have taken ‘reasonable’ due diligence.

The claims of all the claimants were dismissed as they failed to properly analyse the legal significance of the statements made to them before they invested in Eclipse and did not properly analyse the ‘statements that related to the advice of Mr Peacock QC did not constitute misrepresentations’.

Future Films and Bowman had reasonable grounds for believing that the scheme as implemented was consistent with the basis on which Mr Peacock QC had advised.

In addition, ‘neither Future Films nor Mr Bowman was dishonest’.

The claimants’ sample witnesses also failed to prove the quantum of their loss (with one exception).

In concluding the case, Mr Justice Bright said: I have great sympathy for the claimants. Their losses are significant, their suffering has been real (even for those who did not claim for distress) and they have every right to feel aggrieved. When all is said and done, they were badly let down.

‘However, this is not enough for them to have a good claim against HSBC. I also have some sympathy for HSBC and, specifically, for Mr Bowman, who should not have had to deal with proceedings or the allegations of dishonesty that were central to them.’

High Court ruling, Christopher Bernard Upham & Ors v HSBC UK Bank plc [2024] EWHC 849 (Comm)

Earlier settlement with some investors

In March, 177 investors came to an out of court settlement agreement with HSBC over a discrete £240m claim over the Eclipse film scheme involving Disney films and devised by Future Capital Partners. The group were represented by law firms Stewarts LLP, which commented at the time: ‘The parties have settled the litigation without any admission of wrongdoing or liability by HSBC.’

[Thursday 16:09] Andrew Davis – Davis & Co

From 1 May 2024 fees for registering a new company are set to rise significantly for the first time since 2016

Currently, to set up a business or limited liability partnership it costs just £12; this is set to increase to £50 to incorporate a new company or LLP online and up to £78 for same day registrations.

The one-off registration cost is the only increase of this magnitude as Companies House said the charges were not revenue generating and only ‘cover the cost of the services we deliver’.

The cost for overseas businesses incorporating a company in the UK has increased from £20 to £71, which may not prove as much of a deterrent to potential fraudsters. The fee to register annual accounts will also be tripled to £62, from £20.

Alex John, product director at IRIS Software said: ‘The issue of inaccurate and dishonest information on Companies House records poses a serious threat to the UK economy, affecting the integrity of financial systems and hampering fair competition.  

‘The filing fee, which has not increased since 2016, may seem large, but it will ultimately enable Companies House to deliver a better service and allow accountants to access accurate information on the register.’

The increases could have the potential to deter fraudsters from incorporating fake companies.

Dame Margaret Hodge, MP for Barking said on X (formerly Twitter): ‘£12 to set up a business essentially incentivised the creation of phony companies.

‘The new £50 fee is a welcome first step to deter mass fraud, promote good business, and empower Companies House to combat economic crime.’

This £50 fee may not be enough to discourage scammers from impersonating innocent people when they have the potential to achieve a lot more as happened with chef Heston Blumental recently.

There are also increases in the fee for overseas property owners to sign up for the mandatory register of overseas entities (ROE). The current £100 will go up by over double to £234, with an additional fee of £234 for any further updates. This is currently £120. The application for removal will also be increased to £706, a substantial rise from the current £300.

As well as fees increasing from May, there are set to be stricter policies for identification verification online when setting up a company.