Here’s the latest round-up of questions asked by clients and visitors to my Blog, all of which may be of interest to you, with a couple of them hopefully making you smile.
Question:I am single and self-employed and work well over 30 hours per week, but my net earnings are only around £6,000 for the year so I claim working tax credits from HMRC. The problem is I have £26,000 in a savings account which is compensation I received for injuries in a car accident. I declare the interest on the savings when making my claim but have just realised that I haven’t told them about the £26k I have tucked away, am I in trouble with the tax office?
Answer:Under current tax credit rules, it is the income/interest from capital invested that is included in calculating whether tax credits are due and the lump sum from which it’s derived is irrelevant. However when Universal Credits are rolled out nationally this changes and your savings will then count in the calculation. The amount you are entitled to will reduce if you have capital of over £6000 and if your capital exceeds £16,000, tax credits are withdrawn completely.
The good news is that the roll out of Universal Credits is being phased in over 3 or 4 years and only currently applies in North-West England and a couple of towns, such as Inverness and Harrogate. When it will apply to where you live in Shropshire is anybody’s guess so monitor their website at https://www.gov.uk/universal-credit every few months and you’ll get plenty of advanced warning.
Question: I run a dog beauty parlour and am VAT registered. A new member of staff used to be a Veterinary Nurse and has been trained in anal gland draining which I’m now adding to the list of services we offer. As this is a medical procedure, albeit for dogs, do I still have to charge 20% VAT?
Time to Pay
Question: I’m a plumber and following a relationship breakup, I did not have a permanent residence and became self-employed, moving from building site to building site. In my first tax year 2012/13 I earned £13,456, but didn’t know the tax system and did not hear from HMRC, probably because I moved a lot. I now have £2k of penalties and overdue tax to pay of £1.3k, but there is no way I can pay it in one go, what can I do?
Answer: HMRC will agree a time-to-pay arrangement (TTPA); the time given will depend on your current circumstances but they are unlikely to agree to a period of more than 12 months. Give HMRC’s dedicated TTPA section a call on 0845 366 1204, as long as you’re honest with them, they are usually reasonably sympathetic.
Question: I’m a builder (male)specialising in roofing and work outdoors all year. During the winter months I buy 2 or 3 pairs of thick tights every week to keep out the cold. Will the tax office allow these as legitimate expenses or will they disallow them because they think I’m some sort of cross-dresser?
Answer: As you can clearly demonstrate that you work in adverse conditions, I don’t think that they’ll question your sexuality, however whether they will allow the expense is another matter. The basic rules are that any clothing that has “an intrinsic duality of purpose” is not allowed. In other words clothing that can used as everyday clothing, as opposed to uniforms or specialised workwear, is normally disallowed. So as well as convincing them on your sexuality you’ll also need them to accept that tights are not normally worn by men, good luck with that one!
Question: I’m a company director of a small building firm. Last year I bought an 11 year old BMW for £3,500 to visit major customers in and only do around 4,000 miles p.a. I bought the car exclusively for business, with all of the expenses claimed through the business. There is no private use element as the car is kept at the office and I have my own private car; but last week during a routine PAYE visit, the official informed me that I may be liable for a Benefit-in-Kind charge, is this true?
Answer: The quick answer is that it depends on all of the circumstances, but given what you’ve stated, you may well okay. For the vehicle to be classified as wholly and exclusively for business use and therefore allowable, it must be owned and insured by the Company and kept on the premises overnight. Any private use, however small, would render you liable for the charge.
Question: I run my own pub and have in the past kept a Doberman to guard the premises at night, the costs of which were allowed by the tax office. When my last dog died my wife bought two Chihuahuas, which to my surprise do the job equally well; but during a recent VAT visit the official told me that he couldn’t accept that these tiny dogs could guard anything and could only be classified as pets, so the expense of keeping them would not be allowed. I think that this is unfair, can I appeal?
Answer: Yes you can as there is nothing in the tax office guidelines which specifies a particular dog breed. Whilst it may be unusual to use such small dogs to guard the premises, they were originally bred as an alarm dog to alert the household in times of troubles as they have particularly acute hearing.
Property Rental Costs
Question: I own a block of 6 one-bed flats and I’ve had a routine visit by the local Fire Brigade who have advised me that I need to install smoke alarms in all flats plus 7 emergency lights on the stairwell. The total cost is just over £1,500, but I cannot find anything on HMRC’s website that tells me if the alarms and lights are allowable. Can I claim the expense against my tax?
Answer: Assuming the Fire Prevention Officer has confirmed his advice in writing; you can go ahead and claim.
If any of you would like more detailed information on any aspect of UK Tax Questions Answered , send me an e-mail and I’ll be pleased to advise further.