Shrewsbury Tax Accountant answers your questions
It has been over 12 months since I posted the last of a series of blogs on the effects of the coronavirus on businesses and individuals. However, recently I’ve had quite a number of questions sent in that are Covid-19 related and today I will share a few of them of them which I hope you will find interesting or personally relevant:
- Can I pay SSP for a coronavirus related absence?
- Repayment of VAT on beer poured down the drain
- Coronavirus cost of gym equipment
- Tax free garden shed because of Covid?
- Why is it legal to tax SEISS grants but not Universal Credit?
1. Can I pay SSP for a coronavirus related absence?
I only employ 4 staff and one of them, a lady who does my admin, went off work today to care for her young teenage son who has the virus. My question is can I pay her sick pay (SSP) and is this allowable as a business expense? I’m asking the question as the lady is double jabbed and therefore exempt from isolation.
Answer: Sorry, but SSP is not applicable in this case, but you could consider putting her on furlough for the two weeks that she’s likely to be absent and this will provide her with more help than the current SSP rate of £96.35 per week
2. Repayment of VAT on beer poured down the drain
My family and I own a small pub and due to the coronavirus and the various lockdowns, periodically we have had to throw away a lot of beer. My question is, as I’ve claimed back VAT on the beer, am I obliged to pay it back to HMRC?
Answer: Providing you’ve kept a record of what you threw away and when, which can then be linked to when the pub was closed, you do not have to repay the VAT. In your accounting records, this is treated as ullage and should be recorded as an expense so as not to distort your Gross Profit percentage.
3. Coronavirus cost of gym equipment
I am a professional footballer (League 1 club) and would normally use the club gym to keep fit, but from the lockdown starting in March 2020, as my club told me that one of my contractual duties was to maintain peak fitness levels, I had to buy an exercise bike, weights etc in order to keep fit. So, will I be able to claim for the cost of the equipment against my tax?
Answer: I consider that there is a strong case for buying the equipment that you could no longer access at your place of work. In other words, your purchase was necessary for you to perform your (training) duties, in which case it’s likely to be covered by the ‘Covid Working From Home’ relaxations and allowable against tax.
4. Tax free garden shed because of Covid?
From March 2020, because of Covid-19, I was required to work from home (and still do) and my company paid for a garden office to be built, which was a large well-insulated heated shed, with services connected. I’m concerned because our accountant has warned me of a potential ‘Benefit-in-Kind’ charge. There is absolutely no personal use, so is our accountant correct?
Answer: I believe that there is a way around this problem. If you and your employer have a written agreement that the land the office is put on will be reinstated to its original condition once the company no longer requires the office, then a BIK will not arise. Alternatively, instead of reinstatement, the company could sell you the ‘office’ at its then current market value, which I’m guessing is not likely to be very much.
5. Why is it legal to tax SEISS grants but not Universal Credit?
I recently rang HMRC regarding the latest SEISS self-employed grant and the official also told me that when I send in my tax return for the year ended 5th April 2021, that I must add the grant monies received during the year to my Net Profit. This is unfair, as the grant monies received will take me above the NI & tax thresholds and I’ll end up paying NI and tax. Why is it legal to tax grants but not Universal Credit?
Answer: Anyone who was claiming in-work Universal Credit can also claim it if they’re on furlough, with the amount paid adjusted for notional tax and NI paid. You, however, are actually in a better position as the excess of grant that is taxable will attract tax at 20 % and Class 2 NI at 9%, but the balance of 71% is yours to keep.
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.