A. Let us see the Taxman's letters and we will try and sort the matter out for you with the Tax Office. In the meantime, keep this number to hand: 0300 200 3862. If bailiffs do turn up ask to see their photo ID cards, take a note of the ID numbers and call that number to confirm whether the bailiffs are genuine. Also collect evidence of the tax payments you have made recently, such as bank statements.
These may be enough to prove to the bailiffs that you have paid the tax you owe.
Q. I need to get a high-end computer for my business which will cost about £2,200, but I use the VAT flat rate scheme for small businesses which doesn't allow VAT reclaims. I've heard that I can claim back VAT charged on expensive items under the flat rate scheme, is that true?
A. Yes, under the flat rate scheme you can claim back VAT charged on the purchase of capital goods, which are items you will use in your business over a number of years. It must be a single purchase from one supplier with a VAT inclusive total of at least £2000, but that invoice can include several items bought together such as; screen, computer, and printer. The items must not be purchased for resale or for lease or hire.
Q. My company pays me the regular mileage rate of 45p per mile for business journeys I make in my own car. However, to reach certain customers I need to drive on mainland Europe which requires extra car insurance which is quite expensive. Can my company reimburse me for the cost of that extra insurance without any extra tax?
A. The regular mileage rate is supposed to cover all the marginal costs of using your personal car for business, including insurance. So if the company reimburses you for the extra cost of this insurance, in addition to the mileage payment, that would be a taxable benefit in kind.
We need to look at the distances you are driving in Europe, and for what periods. If the time spent abroad is relatively short, it may be more economical for the company to hire a car for you while you are abroad. However, there is no substitute for crunching the numbers.
Q. There is an offer in my area to lease an electric car for two years, to help test the electric charging infrastructure installed by the council. Can my company take advantage of the tax breaks if I lease the car?
A. No. If the lease for the car is in your personal name your company cannot claim the 100% capital allowances which are available for electric and low-emissions vehicles. If the car will be used for your business we can help you crunch the numbers to see if it would be worthwhile for your company to purchase or lease the car and claim the allowances. However, from 6 April 2015 there will be a tax charge for your personal use of the electric car.
Q. My daughter is now studying at University, but she worked full-time after leaving school in June and had tax deducted from all of her wages. Can she claim that tax back now, or does she have to wait until the end of the tax year?
A. She can claim the tax back now, and doesn't have to wait until the end of the tax year on 5 April 2014 to receive her tax refund. She needs to complete form P50 and send to HMRC.
However, if she expects to work again in the Christmas holidays, she may want to wait until she has completed that stint of work to reclaim all of the tax deducted in one go.
Q. I'm going to represent my company on an official UK trade mission to Australia, organised by my trade body. It will involve meetings with Australian potential clients over four days in two cities. My wife will accompany me on the trip, but she will not take part in the meetings. We will stay on in Australia to enjoy a short holiday. How should I split the costs between business and personal?
A. Your wife's share of the costs, such as air-fares and hotel bills, are not a business expense, so you need to personally reimburse your company for those costs. Any expenses relating to the holiday part of the trip (e.g. hotel and car hire expenses) should also be borne by you personally, not by your company.
Q. After purchasing a residential property to let, I spent a considerable amount on kitchen refurbishments and a new central-heating boiler, before letting it for the first time. Can I claim those costs against the rents for tax purposes?
A. It depends on whether the property was capable of being let before you carried out those refurbishments. If it was legally safe to let it - then the expenditure was probably 'repairs' and is allowable. If the property was in such a bad state that it could not be let to anyone, even on a tiny rent, the costs are likely to count as improvements and will not be allowable. We need to look at the detail of what work was done, and the context of your entire lettings business before we give you a final answer.
Q. The Taxman has written to me saying I missed a small pension worth about £800 a year from my last tax return. He hasn't noticed that I also missed it off the last four tax returns. What should I do?
A. Best advice is to come clean immediately and tell the Taxman about all the missing amounts of pension income for all tax years. There may not be more tax to pay if the pension provider has already deducted tax at your marginal tax rate. However, if there is higher rate tax to pay there will also be interest due at 3% and possibly a penalty. By confessing all without delay you can qualify for a reduced penalty, down to say 15% of the tax due. We can help you with those penalty negotiations and may be able to get it suspended for up to two years.
Q. I've just won a sports car! The snag is the prize is only available from the company's headquarters in Seattle, USA, although there is a cash alternative. Are there any tax implications of accepting the prize in the form of the car or as cash?
A. Most states in the USA impose a tax on competition prizes, but the awarding company may allow for that. There is no similar tax in the UK. If you take the car and ship it back to the UK there will be import duties and VAT to pay, so the cash alternative may be more tax efficient.
Q. I work through my own personal service company. When I go abroad on business my customer normally pays for the cost of hotels and meals. Can I still claim the personal incidental expenses (PIE) from my own company?
A. Yes you can still claim the PIE, which is £10 per night for overseas trips, when you are abroad on business. The PIE is supposed to cover incidental expenses such as phone calls, newspapers and laundry, not the cost of hotel or meals.
Q. My investment property was let as furnished holiday accommodation until 31 August 2013. As I was not getting enough income as holiday lets I have let it on rolling six month tenancies from September onwards. How do I report the income? Should I split the year at 31 August, with the first five months treated as holiday lettings and the remaining period as normal property let?
A. For the property to qualify for the special tax reliefs due for furnished holiday lettings (FHL), it must qualify as FHL for the full 12 months. One of the conditions is that it must be available for holiday lettings for 210 days in the year. Your property was only available for holiday letting for 149 days, so it does not qualify for FHL for 2013/14. You should treat all of the income from the property as ordinary let property income in 2013/14. Assuming the property qualified as FHL in 2012/13, your FHL business is treated as ceasing on 5 April 2013. You may need to calculate closing balances for capital allowances at April 2013. We can help you with that.
Q. I've heard that I won't be able to reclaim the sick pay I pay to my employees from April. Is this true?
A. Unfortunately yes. Employers can currently recover statutory sick pay (SSP) as an off-set against PAYE due, if the SSP exceeds 13% of the class 1 NICs the employer pays over for the tax month. The excess SSP above the 13% threshold is the off-set amount.
For SSP paid on and after 6 April 2014 no off-sets will be given. The SSP will be an absolute cost to the employer, although it is a legal requirement to pay SSP to eligible employees. In return the Government is going to provide more help to employees who have been off sick for 4 weeks or more, in the form of a "back to work plan".
Q. All my employees are entitled to a bonus for exceeding performance targets in 2013, including those who left before the end of the year. How should I report the bonus due to the former employees to HMRC, and do I have to deduct tax?
A. Under RTI you need to set the 'payment after leaving' indicator on the full payment submission (FPS) that includes the bonus payment to your former employee. Also on that FPS use the same payroll ID for that person as applied while they were an employee, and show the date the employee actually left. The year to date figures on the FPS should include the bonus payment as well as the previous pay and deductions for the former employee. When paying the bonus to a former employee you need to use the PAYE code 'OT' on a month 1 basis to deduct tax and NICs.
Q. I work through my own personal service company. When I go abroad on business my customer normally pays for the cost of hotels and meals. Can I still claim the personal incidental expenses (PIE) from my own company?
A. Yes you can still claim the PIE, which is £10 per night for overseas trips, when you are abroad on business. The PIE is supposed to cover incidental expenses such as phone calls, newspapers and laundry, not the cost of hotel or meals.
Q. My investment property was let as furnished holiday accommodation until 31 August 2013. As I was not getting enough income as holiday lets I have let it on rolling six month tenancies from September onwards. How do I report the income? Should I split the year at 31 August, with the first five months treated as holiday lettings and the remaining period as normal property let?
A. For the property to qualify for the special tax reliefs due for furnished holiday lettings (FHL), it must qualify as FHL for the full 12 months. One of the conditions is that it must be available for holiday lettings for 210 days in the year. Your property was only available for holiday letting for 149 days, so it does not qualify for FHL for 2013/14. You should treat all of the income from the property as ordinary let property income in 2013/14. Assuming the property qualified as FHL in 2012/13, your FHL business is treated as ceasing on 5 April 2013. You may need to calculate closing balances for capital allowances at April 2013. We can help you with that.
Q. I've heard that I won't be able to reclaim the sick pay I pay to my employees from April. Is this true?
A. Unfortunately yes. Employers can currently recover statutory sick pay (SSP) as an off-set against PAYE due, if the SSP exceeds 13% of the class 1 NICs the employer pays over for the tax month. The excess SSP above the 13% threshold is the off-set amount.
For SSP paid on and after 6 April 2014 no off-sets will be given. The SSP will be an absolute cost to the employer, although it is a legal requirement to pay SSP to eligible employees. In return the Government is going to provide more help to employees who have been off sick for 4 weeks or more, in the form of a "back to work plan".
Q. All my employees are entitled to a bonus for exceeding performance targets in 2013, including those who left before the end of the year. How should I report the bonus due to the former employees to HMRC, and do I have to deduct tax?
A. Under RTI you need to set the 'payment after leaving' indicator on the full payment submission (FPS) that includes the bonus payment to your former employee. Also on that FPS use the same payroll ID for that person as applied while they were an employee, and show the date the employee actually left. The year to date figures on the FPS should include the bonus payment as well as the previous pay and deductions for the former employee. When paying the bonus to a former employee you need to use the PAYE code 'OT' on a month 1 basis to deduct tax and NICs.
Q. I've received a refund of the PPI premiums I paid on top of my mortgage. Do I need to declare this sum on my tax return?
A. The refund of payment protection insurance (PPI) premiums should not be included on your tax return as it is a repayment of a fee that you were incorrectly charged. However, the bank will have also paid you 8% interest on the PPI refund, and that interest should be declared on your tax return, just as if it was interest paid on a regular savings account. Some banks deducted 20% tax from the interest element of the refund, others did not, so you should check the documents you received with the refund to see if your payment had tax deducted from it or not.
Q. I'm self-employed. How do I work out what to claim for motoring expenses in my accounts?
A. You can calculate your business-related motoring costs by either:
a) Take the proportion of business miles to total mileage driven in your vehicle in the year and apply that proportion to your total motoring costs for the year; or
b) Use the fixed expense of 45p per business mile for the first 10,000 miles driven in the year and 25p per mile for additional business miles in the year.
If you use method a) you can also claim capital allowances on the cost of your vehicle, restricted for the private use of that vehicle. If you use method b) you can't claim capital allowances for your vehicle but you can claim the interest amount of any finance lease used to purchase the vehicle. We can explain exactly what you can and cannot claim in your accounts for tax purposes.
Q. How do I go about claiming the £2,000 employment allowance?
A. From April 2014 most employers will be able to claim a £2,000 annual allowance to set against the employer's class 1 NICs due on their employees' wages. It will be easy to claim.
All you need to do is a tick box on the first Employer Payment Summary (EPS) submitted for 2014/15. Your payroll software will show you how, or we can do that for you.
Once the claim is made it stays in place for all future tax years, until the PAYE scheme is closed or the Government withdraws the allowance. Only employers can claim the employment allowance. It can't be set against class 2 or 4 NICs paid by the self-employed.
Q. I've recently made a gain of £62,000 by selling the shares I acquired though EMI options issued by my employer. Does that big gain push me into a higher tax bracket for income tax? What tax should I expect to pay on the gain?
A. The gain made in 2013/14 by selling the shares you acquired through the EMI share option scheme should qualify for entrepreneurs' relief and thus be taxable at 10% after deducting your annual exemption of £10,900. However, entrepreneurs' relief will only apply if you were still employed by the company at the time you sold the shares, and the period between the grant of the share options and the date you sold the shares was at least 12 months.
The amount of the gain in 2013/14 will not affect the top rate of income tax you pay for that tax year.
Q. I am a member of the APM (Association for Project Management) and my company pays my membership fees to the APM on my behalf. Does this payment have to be reported on the form P11D? If so, do I pay tax on the membership fee?
A. If your company does not already have a "dispensation" from reporting P11D business expenses for 2013/14 it could apply for one by 5 April 2014 using form P11DX or on the HMRC website. That dispensation will cover payment of the APM fees as the APM is on HMRC's approved list of professional bodies.
If the dispensation for 2013/14 is not acquired the APM fee should be reported on the form P11D for that tax year. You should then enter the P11D figures on your 2013/14 tax return and make a claim on the same return to set the APM membership fee against your taxable earnings. As a consequence of that claim on your tax return you should not pay tax on the membership fee.
Q. Can my company make regular donations to charity and receive tax relief for those gifts?
A. Yes, if your company is making a profit it can make charitable donations and get relief against corporation tax. It should claim the total donations made in the accounting period on the corporation tax return for that period. However, the deduction of donations cannot change a taxable profit into a loss, or increase a taxable loss. In those cases there is no tax relief for the donations. Although, if your company is part of a group of companies, the relief for the excess donations may be passed to another member of the group.
The recipient charity cannot claim gift aid relief on the company's donation.
Q. My father resigned as a director of our family business in March, and started to draw his pension, but he retained 15% of the shares in the company. It seems likely that company will be sold later this year. Will my father get entrepreneurs' relief on any the gain he makes on his shares?
A. Unfortunately not. To qualify for entrepreneurs' relief the shareholder must be an employee or officer (director or company secretary) for the full 12 months that ends with the sale of the shares, or the date the company ceases to trade. If you reappoint your father as a director (he doesn't have to get paid for that role) and then wait for 12 months before the sale, he should qualify for entrepreneurs' relief.
Q. I run a small independent chemist which has three employees. I was told that my business would not qualify for the employment allowance as a good deal of our work involves dispensing NHS prescriptions. Is that true?
A. The initial guidance from HMRC appeared to indicate that pharmacies would not qualify for the employment allowance, which is worth up to £2000 per year. However, revised guidance from HMRC confirms that independent pharmacies that are conducting a business, including over the counter sales as well as dispensing NHS prescriptions, are entitled to claim the employment allowance.
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