Plus four other questions answered
Although Boris has been making sweeping claims that he plans to reduce our taxes, nothing substantial has been announced recently, nor has there been any significant news from HMRC, so I thought I would share with you some of the recent questions asked by clients and readers of the Blog, which will hopefully be of some interest.
This week’s selection:
- Can I use the company van to commute to work?
- What do I do about tax if I’m bankrupt?
- Can I claim for my washing machine and dryer?
- Cost of employing a relative
- Deliveroo insurance
1. Can I use the company van to commute to work?
I employ 6 people and run a small wholesale distribution company, specialising in sanitary products and we own a Mercedes Sprinter van for deliveries. The main driver takes the van home after work and brings it back in the morning, as he cannot get to work by public transport for 7am, his start time. I’ve read the guidance on HMRC’s website, and it says that I have to apply the full £3,500 P11D van benefit charge to the employee. This seems very unfair, as he has no real benefit.
Answer
You I agree with you, but I believe that you may have not read, or perhaps not fully understood the guidance notes. Section 155 of the Corporation Tax Act 2010 sets the amount of the charge and how it should be applied. Assuming what you’ve told me is accurate, the value of the charge can be set to nil, providing the van is only used for business travel and commuting, with very limited or zero private use.
2. What do I do about tax if I’m bankrupt?
In September last year I had to declare myself bankrupt because of Covid-related losses. I started up again soon after and have seen trade gradually return. I want to declare my post-bankruptcy income, but HMRC has cancelled my UTR tax reference, what should I do?
Answer
Getting a new UTR for the period after bankruptcy, is simple and can be done online or simply by calling HMRC’s helpline. Regarding allowances, for the tax year during which you went bankrupt, they are split using the fairest possible basis, which is normally a simple time apportionment.
3. Can I claim for my washing machine and dryer?
I am a full-time mobile hairdresser and operate from home and as you can imagine I’m always washing my salon tunics, client gowns and especially towels. I recently bought an industrial quality washing machine and an associated tumble dryer, which set me back the best part of £2,000, but my bookkeeper has told me that as I also use them for my own personal washing, that I can’t claim for them, is she right?
Answer
Good news, whilst it may be necessary to allocate a percentage of the cost of buying the equipment and associated soap and electricity costs for private use, as yours is a full-time job, and the private use is likely to be a minimal percentage of the overall costs, I would advise claiming for 90% of the purchase price and use the same percentage for the ongoing running costs.
4. Cost of employing a relative
I’m a sole trader specialising in central heating boilers and cannot manage by myself. My son has recently qualified as a plumber and has demanded £500 per week to work with me, which is above the going rate, but he is my son, so I’ve agreed. I certainly don’t want to make him a partner, but what’s best tax-wise, employing him or taking him on as a sub-contractor which would save me paying NI on his wages?
Answer
The sub-contractor option would only be a temporary fix, unless your son subcontracts to a number of other businesses, which I doubt. If you employ him, the potential cost to you of Employers NI is about £1,750, but the good news is you’re currently exempt from paying the first £5,000., which would pretty much cover any NI even if you had a rush of blood to the head and doubled his wages!
5. Deliveroo insurance
I am a part-time Deliveroo driver and have to pay an additional goods in transit/public liability insurance at 80p per hour when I am delivering. I am aware that HMRC’s 45p per mile rate covers all motoring costs including insurance, but as this is specific additional insurance required in order to do the job, I was wondering if this is allowable as well as claiming mileage?
Answer
The key issue is whether or not this is additional insurance to cover specific business costs, not covered by a standard motor policy. If it is, then it will be claimable. But to be on the safe side, I would ask your motor policy insurer to confirm in writing that their policy does not cover transit/public liability insurance.
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.