UK Tax Questions Answered by Shrewsbury Accountant No. 40

Hint: there were some teeny, weeny little problems

Now that the dust has settled over this year’s Budget, I have had the opportunity to look deeper into the Chancellor’s Red Book (named after the traditional colour of its cover). This modest little tome, contains an analysis of the economy and a summary of the Budget tax measures, with a breakdown of the economic information on which Jeremy Hunt based his budget decisions.

Usually, I can find some hidden gems that have previously escaped the headline writers, but not alas this year, so as it’s been a while since I shared some of the more interesting questions asked by clients and readers of the Blog, here’s today’s selection:

1. Can I take HMRC to court?
2. I have a cunning plan!
3. Can I claim for new trousers?
4. I want my fees refunded!
5. Please Mr Taxman, can I have my overpaid tax back?

1. Can I take HMRC to court?

In 2012 my pension adviser suggested that I transfer my pension pot of £157,500 into a new scheme for a better return. Unfortunately, the new scheme broke the rules and the pot is now under the control of the Pensions Regulator. I have now discovered that because of various charges, the pot has been devalued by 50%. My question is, as the new scheme could only operate because it had been issued a PTSR by HMRC, is HMRC liable for not undertaking due diligence and can I sue them for my losses?

Answer

The PTSR (Pension Scheme Tax Reference), or submission reference number is issued by HMRC to pension schemes who inform the tax office that they have set up a scheme and need to submit annual tax returns, similar to an individual taxpayer. HMRC are not responsible for the correct regulation of a scheme, that is the responsibility of the Pension Regulator, so the answer to your question is unfortunately, no.

2. I have a cunning plan!

Since Covid severely impacted the car hire/lease dealership that I’m a director of, we now buy vehicles outright and lease them to our customers. My question is, if my company purchases a new car in cash, can I then personally lease it? It looks like a win win to me, I could claim VAT back, there’d be no benefit charge and I could write off the car against tax. Do you see any flaws in my cunning plan?

Answer

As Blackadder was wont to tell Baldrick, there’s just a couple of teeny, weeny little problems with your plan. Firstly, you personally can’t claim back the VAT or the Capital Allowances and secondly, unless you paid the lease charge, you’d be liable for the full Benefit In Kind charge. Personally, I’d stick to car sales and leave tax matters to the professionals!

3. Can I claim for new trousers?

UK tax questions answered

I am a motorcycle courier and I believe that the armoured trousers I wear as protective clothing, should be classified as essential safety equipment, like a helmet, and therefore tax deductible. Am I correct?

Answer

I am pleased to tell you that as you are a professional motorbike rider, the answer is yes, plus you can claim for your protective gloves and jacket.

4. I want my fees refunded!

I left my old accountant because of very poor service. I paid 2½ years’ worth of fees by monthly DDM for an ‘all inclusive’ service (annual accounts, tax returns, advice etcetera), but in the 2½ years, they only produced one set of accounts and gave no advice. I asked for a refund of 18 months fees, but he’s said that payments are a retainer, not a payment towards an annual bill, so no monies are due back. Is this fraud?

Answer

This is not fraud, but you should carefully read the letter of engagement when you first appointed him, which should make clear what his obligations are under the agreement. If you then consider that he’s breeched the agreement point this out and threaten legal action, which usually works.

5. Please Mr Taxman, can I have my overpaid tax back?

I have just been on the phone to HMRC to request a refund of overpaid CGT under the 60-Day reporting rules and was told that the refund time is currently 17 weeks. It’s rather ironic that HMRC want their report and money within 60 days, but they’re happy to delay refunds for 120 days. This seems grossly unfair; is there anything I can do and will they pay me interest?

Answer

As you have correctly reported the sale of your property and paid the CGT due within the statutory time limit, you can only request a full/part refund once you have submitted your tax return for the year. Refunds are now automatic following receipt of a tax return, so I suspect that you are referring to the 2020/21 tax year. That being said, yes HMRC’s actions are unfair and to make matters worse, statutory interest is not payable unless the refund is delayed until the succeeding tax year.