UK Tax Questions Answered by Shrewsbury Accountant No.25

Posted by on May 10, 2018 in Business Tax, Opinion, Personal Finance, VAT

Here is my latest tranche of UK Tax Questions Answered. Each question is from a Tax Blog reader which I hope will be helpful to you or at least you’ll find the answers interesting. The Topics today:

  1. Can I claim for tofu diet products
  2. Property sale to daughter
  3. What does HMRC mean by ‘Repayment pending’?
  4. Our loan has gone, so do we owe tax
  5. VAT Return cock-up

1. Can I claim for tofu diet products

We are a small limited company and one of our directors has gone on a diet and has told me that he struggles to get healthy food while working away. He has presented me with 2 receipts adding up to about £75 for tofu based diet products from local supermarkets. I don’t believe the expense is allowable and refusing the claim is no doubt going to cause an argument. So I have to be able to explain exactly why this isn’t allowable; do I tell him that subsistence expenditure is only allowable as a form of compensation because you aren’t able to cook and eat as normal, is this right?

Answer

Any food and drink costs you incur whilst you are away from your permanent workplace are potentially tax deductible for the company and HMRC have published a list of advisory scale rates which your company can use to make day subsistence payments to an employee. These payments can be made free of tax and NIC and your company can claim a tax deduction for this expense.

The rates are £5 when you’re away for at least 5 hours; £10 when you’re away for at least 10 hours and £15 can be paid where you have to work later than usual and finish work after 8pm having worked your normal working day and it is necessary to buy a meal which you would usually have at home. So I’m afraid that you’ll have to tell the director that he can’t have his £75 for tofu.

2. Property sale to daughter

Three years ago, following my wife’s death, I retired to a little holiday place on the coast that I already owned. I subsequently sold the family home at a big discount to the market value, to my daughter; but I still made a healthy gain and assumed that this was exempt from capital gains tax. I’ve now been told that I should have declared this to HMRC; is this correct?

Answer

You haven’t said when you moved out of the property, but it is highly likely that you will be eligible for Principal Private Residence Relief, which will mean that no tax of any kind is payable, assuming of course that the house has been your only or main residence throughout your period of ownership. If you follow this link, the HMRC guidance note is actually very helpful.

3. What does HMRC mean by ‘Repayment pending’?

I have registered online with HMRC’s Government gateway to view my tax account and make payments.

HMRC Repayment pending

When you’re waiting for HMRC to pay

Today I checked as I’ve been expecting a tax refund following my Tax Return submission in early January and all that’s shown is ‘Repayment pending’; what does HMRC mean by this, as my refund has now been ‘pending’ for over3 months?

Answer

The message effectively means that the refund has been ‘agreed’ but hasn’t actually been sent out yet. It could also mean that the repayment is going through internal security checks, but 3 months is a rather long time. My advice is to phone HMRC (Tel: 0300 200 3310) and simply ask why the repayment has not been made. In my experience this seems to complete their security checks as to whether the claim is genuine one or not and it usually means that the repayment is issued within 10 days.

4. Our loan has gone, so do we owe tax

Please advise. I run a small motor factors company and we owe £10k to another private company (one of our old suppliers) who granted us this loan several years ago to enable us to build up stock levels. I found out recently that this company has been dissolved and I want to know what happens to the loan on our Balance Sheet and are there any tax implications for my company?

Answer

If your company owes a debt of money to another company and that other company has been dissolved without distributing the £10k asset to its shareholders, or realising it for its creditors, then in theory the £10k is now owed to Her Majesty’s Government.

In reality, as the money owed was a stocking loan, your old supplier had probably been writing down the loan over a number of years and in all probability, it no longer exists. The £10k loan amount on the Balance Sheet should be transferred to the Capital & Reserves section and there will not any tax implications.

5. VAT Return cock-up

My wife and I run a village general store and are VAT registered. Most VAT quarters we pay a modest amount of VAT with one in three Vat returns being a repayment. Last year we took on a new bookkeeper and ever since we’ve been getting VAT refunds every quarter, so I recently looked at what she was doing. Her bookkeeping was perfect but unfortunately she had entered all pet food sales as zero rated and it looks like we owe the vatman around £4,500. How much trouble are we in and what do you suggest I do?

Answer

Do not worry; this is not as serious as you think. You can adjust your current VAT account to correct errors on past returns if they tick the following boxes:

  • The amount involved is below the reporting threshold of £10,000
  • The errors are not deliberate
  • The accounting periods in error are no more 4 years ago

If the errors don’t tick the above boxes you must report the error to HMRC on VAT652, however in your case you have ticked all the boxes so just make an adjustment on your next return and if you would like more detailed help try visiting https://www.gov.uk/vat-corrections which should do the trick.

Image of David Jones Shrewsbury Accountant and Founder of Morgan Jones

If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.

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