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Now that the new tax year is well under way, here are a number of topics that have been raised by clients over the last few weeks.

  1. Tax Deductions on Clothing
  2. Limited Company Loans
  3. Benefits in Kind to Employees
  4. VAT Submission issues
  5. Partnership Tax Returns
  6. Buy-to-Let & AP1 forms

Tax Deductions on Clothing

Question:

I’m an equine sports therapist and visit various stables to work on horses that have been injured. I spend a small fortune on specialist clothing, riding hats, jodhpurs, breeches and riding gloves, but have been told by a friend who is a bookkeeper, that they’re not tax deductible as the clothes don’t constitute a uniform. This seems very unfair, are there any exceptions to this rule?

Answer:

As the expression goes, a little knowledge is a dangerous thing! Your friend is correct with regard to normal clothing, but yours is specialist clothing and comes under the ‘workwear’ exemption and can be claimed for.

Limited Company Loans

Question:
    I am the sole director of a limited company and my friend has asked if he could borrow £1000 from the company. It is intended that interest will not be charged

  1. Is it permissible for me as sole director to lend from my limited company to a personal friend?
  2. What are the tax implications if any, as the amount is only £1000?
  3. What are the implications if paid within the accounting year end or after the year end?
Answer:

The simple answer to question 1 is yes and there will be no implications, tax or otherwise if the money is passed through the director’s loan account as there would be no need for disclosures.

Benefits in Kind to Employees

Question:

I have expanded my business to a different part of the country. As part of this, one of my staff has been temporarily placed at the new base (placement will last up to 1 year). I am therefore paying for a property for the staff member to use whilst he is on placement. Would this be treated as a benefit in kind for the employee?

Answer:

If you don’t get a dispensation, then there’s strictly a benefit, if the rental agreement is in the employee’s name. However the employee can claim a corresponding expense deduction, since what you have described is a temporary workplace.

If the staff member subsequently decides to make it permanent, any benefit may then fall within the removal expenses exemption, if it is done by way of employee reimbursement.

VAT Submission Issues

Question:

Yesterday HMRC’s online system wouldn’t accept a VAT Return so I left it as unsubmitted. This morning I find that it has been accepted as a NIL return, which it is not.

When I viewed the return all the numbers had been eliminated and substituted as zero, what do I do?

Answer:

I’ve had a spate of clients with similar problems recently and the VAT Office’s advice is to attempt to resubmit a couple of days later. However if that fails, send a copy of the NIL return together with a copy of the VAT Account you used to submit the return plus a cheque for what you owe to : HMRC – VAT Error Correction Team,

13th Floor North Euston Tower, 286 Euston Road, London, NW1 3UH

Partnership Tax Returns

Question:

My friend and I registered for Self-Assessment as a partnership in April 2013, however before the business had actually started trading he had a serious car accident and pulled out so I continued as a sole trader and wrote to HMRC informing them of the change. I then filed my own Tax Return in January, but have now found that they have fined me for not submitting a partnership Tax Return. Do I have to pay the fine?

Answer:

HMRC issued the fine because, even though you informed them in writing, there was a short period of partnership and a Nil return should have been sent in. Assuming that you kept a copy of the letter, download form SA371 and appeal the fine and send in your letter as evidence.

HMRC have recently announced they are being much more flexible on fines and as it would appear that you have a genuine and ‘reasonable’ excuse, you have a good chance of being successful with your appeal (see my 6th June Blog)

Buy-to-Let & AP1 forms

Question:

My wife and I brought 2 Buy-to-Let properties 3 years ago, part cash, part mortgage. They are in joint names only because the lender needed my salary as a fall-back in case anything went wrong, as my wife was not working. The income is apportioned 50 – 50 and the lender has now agreed that I can transfer half of my 50% (and therefore rental income) to her. This will clearly reduce the amount of tax we need to pay, which was the original intention.

I have looked online and assumed it would be simple; a deed of trust and informing the HMRC would do the trick. I can’t however, find anything on their site that says ownership cannot be changed after purchase, but my letting agent says his accountant has advised it can’t be done. Is there any advice you could give me on this. Thanks.

Answer:

I’m pleased to tell you that your letting agent is wrong. You will need to get your solicitor to prepare a simple deed of gift transferring the 25% of the equity to your wife and complete form AP1 which he will send to your local Land Registry Office. There is no need to inform HMRC.

 

Image of David Jones Shrewsbury Accountant and Founder of Morgan JonesIf any of you would like more detailed information on any aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.

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