UK Tax Questions Answered by Shrewsbury Accountant No.7

Time for another tranche of questions I’ve received recently from clients and subscribers to the Tax Accountant Blog.

The Tax Subjects in this round-up are:
• Business Miles you can claim
• VAT Return Queries
• Childcare
• Benefits Fraud
• Class 2 National Insurance

Business Miles

Question: Please can I get some advice as to which business miles I can claim? To keep it simple, I will give the places ‘letters’. I live at ‘A’.
I work at ‘B’. I went on a course at ‘C’ and I visited a client at ‘D’
When I visited the client at ‘D’ I went from my home address, so am I right in presuming the miles I will claim are A to D and back to A again? When I went on the course, I drove to work as normal (A to B) then I drove to the course (B to C) then I drove home (C to A). C you tell me which miles I should claim?
Answer: : What is tax deductible would be anything except A to B or B to A and by tax deductible I mean you won’t get charged PAYE & NIC on the claim if your employer pays you the mileage, or if they don’t you can reclaim the tax on form s336.

VAT Return Queries

Question:
Would you be able to help me regarding the following queries I have on my VAT Return?

1. There are purchases for parts brought from overseas particularly Japan and USA with no VAT on the receipts. These were bought online. I suppose there is no VAT to reclaim here?
2. I have a couple of receipts for staff team building. Can the VAT on these be claimed as a form of training.
3. A few receipts are torn and the dates and supplier is not clear. Can in still include these in the Return?

Answer:

1. You should have paid VAT on any import with a value of over £15, which can be reclaimed.
2. Although there is doubtless a business purpose, HMRC can disallow input tax recovery if they consider the expense as entertainment, but personally I would claim it.
3. It depends, a VAT invoice is required for recovery of input tax, but if they are less than £100 they should be claimable under the “less detailed tax invoice” rule; otherwise you must get a duplicate.

Childcare

Question: I am a self-employed chiropodist and employ a nanny for my family (nothing to do with the business). I want to use my nanny to offer my clients childcare for their kids during consultations at an additional cost to them. Am I then allowed to claim my nanny’s wages as a business expense?
Answer: Subject to complying with the rules on childminding, your nanny’s wages would be tax deductible, but only insofar as the time spent on looking after your clients’ children.

Benefits Fraud

Question:I belong to a charity group that offers financial advice for people in need and during a recent visit to a lady I discovered a major benefit fraud. She owns a house and rents this out and does not declare the rent to HMRC; she is also involved with other family members in a tax credit fraud. The rules of the charity are that we have to offer client complete confidentiality, but am I in trouble if I don’t tell HMRC?
Answer: If you consider the person was seeking legal advice (i.e. concerning their rights, duties & responsibilities) from you (as distinct from asking you to fill in a claim form or calculate some figures), then the information is likely to be subject to POCA (Proceeds of Crime Act) privilege and therefore not reportable. My advice is that you should make a full report back to the charity and let the charity’s legal adviser make the decision

Class 2 National Insurance

Question: I started my business 18 months ago and earlier this year I paid 20% Income Tax and 9% NIC on my first year’s profit, but now I’ve received a snotty letter asking for £143 more of NIC, without an explanation. As HMRC agreed the figures and sent me a bill (which I paid) how can they ask for more NIC retrospectively?
Answer: If you look closely at the letter, you’ll see it’s from the National Insurance Agency and what they are asking for is Class 2 NIC, which is not collected by HMRC, but paid directly to the Agency.
Everybody who is self-employed has to pay this additional small levy, which is a hangover from the old self-employed weekly stamp and in the current tax year is £2.75 per week. So in a full year you’ll pay 52 x £2.75 = £143. They should have sent you a form when you originally registered for self-employment, but it’s not too late, you go to their site and register yourself. Go to: http://www.hmrc.gov.uk/payinghmrc/class2nics.htm