UK Tax Questions Answered by Shrewsbury Accountant No. 35

And five other tax queries

Rather than my customary Blog on the recent Budget, I thought that I’d wait a few days until all the small print has been published, as to quote Ludwig Van Der Rohe ‘The devil is in the details’.

So, as it’s been three months since I last posted a Blog on the many tax questions asked by readers of my Blog and by existing clients, I thought it time to share with you a handful of the more interesting questions I’ve received in recent weeks, which I hope you will find interesting and informative. The Topics today:

1. Ford Ranger Wildtrak – Commercial Vehicle or car?
2. Is rat catching liable at 5%VAT?
3. Timing is critical in deciding VAT rate
4. Another casualty of Brexit
5. HMRC’s emails have rhythm!
6. Taxed on non-existent private health insurance

1. Ford Ranger Wildtrak – Commercial Vehicle or car?

I run a small building company and recently bought a Ford Ranger Wildtrak that has a double cab and which I need to transport my 3 lads and myself to sites. It also can carry a decent payload of over a tonne. The garage stated that it was a commercial vehicle, but I’ve now had conflicting advice as to whether or not it’s classified as a car and if it is, it will mean no VAT refund, Benefit-in-kind charges, less capital allowances etc. My google searches haven’t helped as most refer to the Coke case, which has confused me even more. Help please?

Answer

The primary reason that your searches on Google haven’t helped is the so-called ‘Coca Cola’ case, in which a similar double-cabbed pick-up was classified as a car. The critical difference, however, is in the payload the truck can carry and as the Wildtrak is certified to carry over one tonne, it is classified by HMRC as commercial.

2. Is rat catching liable at 5%VAT?

Hi, my partner and I run a small cleaning/pest control business and recently invoiced a customer for work at one of their properties, killing the rats and clearing out all the accumulated rubbish. They have come back asking for our invoice to be resubmitted, charging VAT at 5% instead of 20% on the basis that the building has been empty for over 2 years. Are they correct?

Answer

No, they are not. VAT Notice 708 refers to the renovation of empty dwellings and section 8.4 gives examples of what is and isn’t eligible for the 5% VAT rate. The Notice also clearly states that all other services not directly related to repair or maintenance, such as cleaning and pest control, are standard rated.

3. Timing is critical in deciding VAT rate

I’m buying a new build house and intend using a local firm to supply the laminate flooring. The builder will allow the flooring company to measure before completion but will only allow it to be laid once the new build is legally handed over. I have read the vat guidance but am unclear as to the VAT rate, as one flooring company has told me the flooring is 0% VAT, whilst another say’s its chargeable at 20%. As I am having laminate throughout the house, 20% VAT on top would cost me around £1,600. Which advice is correct?

Answer

The critical question is when will the laminate flooring be put down; if either the builder or the local supplier does it prior to the completion certificate, it’s 0% VAT, but if done after completion it will be 20% VAT. Personally, I would have a quiet word with the builder and make sure you give him a decent bottle of whisky!

4. Another casualty of Brexit

I’ve run a consultancy business online for over 2 years from a villa I own in Spain and have decided that I’ll make the change permanent. The Spanish authorities have told me that they’ll accept my application for ‘Residencia’ but they’ve asked me to provide a tax clearance certificate from HMRC for the past 3 tax years. I’ve looked on HMRC’s website and can’t find any mention of this document, can you help, please?

Answer

Read more on Brexit

Unfortunately, you are yet another casualty of Brexit. The requested certificate is a statement by a tax authority in the EU that you’ve complied with all your tax obligations, but it’s no longer issued by the UK Treasury, as we have left the EU. They may however accept form SA302 (a summary of the income that has been reported to HMRC) which can be downloaded at https://www.gov.uk/personal-tax-account

5. HMRC’s emails have rhythm!

I run a small business employing 10 staff and have signed up to HMRC’s offer to send all communications by email. Today I received an email from them that read, “We are making some changes around how we deliver HMRC’s email service. You may notice some slight changes to both the look and rhythm of our email contact from the 17 October 2021 as we carry out some testing, with full service returning from 04 November 2021.” What on earth does this mean?

Answer

I received an identical email recently which made me smile, as I didn’t know that emails had rhythm! But seriously, it’s only their rather ham-fisted way of saying they’re turning off emails for 2.5 weeks.

6. Taxed on non-existent private health insurance

I’m getting fed up, HMRC are continuing to issue me with a tax code that has a £500 adjustment for private health insurance. I stopped receiving this benefit 5 years ago when I changed my job and I’ve not had any such benefit since, also no P11Ds have been returned showing such an amount, but it keeps on reappearing. How can this happen and how can I get them to issue the correct tax code?

Answer

The most likely explanation for your incorrect coding is that your former employers have never notified HMRC of an end-date for your employment with them. This means that you are treated as still being employed there albeit with zero earnings and they have been accounting for the Benefit-in-Kind under ‘payrolling’ rather than the year-end P11D process. The combination of this bit of ineptitude, combined with the probability of HMRC incompetence, has resulted in the ongoing incorrect coding. I would ask your current employers to intervene.