Entries Tagged 'Tax tips' ↓

Below is our summary of the tax consequences of your business sending gifts to customers and staff:

• Gifts to customers of the products or services you normally sell are tax allowable, as long as you are not in the food business.
• Small promotional gifts of any item are also treated as tax allowable for your business if they cost less than £50 each and carry a clear advertisement for the business. However, you cannot get income tax or corporation tax relief for the cost of gifts of food, drink, tobacco and gift tokens of any value.
• A number of gifts worth more than £50 in total should not be made to the same person in any 12 month period.
• If you are VAT registered you can reclaim the VAT on small gifts that cost up to £50 each, including gifts comprising of tobacco and alcohol.
• If the gift cost more than £50 (net of VAT) you must account for the VAT on the item as if you had sold it at cost.
• Gifts to your staff are tax allowable, but your employees could be taxed on the value of the gift as a benefit in kind. In that case you would also have to pay Class 1A NI on the value of those gifts. The Taxman does consider some small items to be trivial benefits, which can be given as tax-free gifts to staff members. Trivial items can include seasonal gifts such as a turkey, an ordinary bottle of wine (not fine vintage or champagne), or a box of chocolates.

If you subscribe for shares in a trading company, and later dispose of them at a loss, you can normally offset the loss against other taxable income (section 131 of the 2007 Income Tax Act).

However, the Taxman has found a wrinkle in the tax legislation such that he thinks subscriber shares issued in joint names (usually married couples) cannot benefit from this offset.  Section 131 applies to shares “which have been subscribed for by the individual”.  The Taxman argues that jointly owned shares are subscribed for by a couple rather than an individual and thus the offset is not available.

A way round this is for one individual to subscribe for the shares and then transfer some of them to their spouse. The spouse is then treated as subscribing for the shares in their own right. 

This is how we recommend shares are subscribed for when effective joint ownership is desired.

The Taxman’s telephone helplines do not always give the correct answer.  There have been two recent cases where a verbal assurance from a telephone helpline was not later accepted by a Tax Officer who then raised a penalty for the incorrect tax treatment.  You, the taxpayer, suffers where there is a disagreement between the helpline advice and the Tax Inspector.

Case 1: In the first case Corkteck Ltd exported soft drinks to Poland through a third person: Sintra SA. The VAT helpline told Corkteck that the exported drinks would be zero-rated for VAT. However, the VAT Inspector decided the drinks should have been standard rated as Sintra SA was not registered for VAT within the EU.

Case2: In the second case Acrylux Ltd hired out a private residential property for various functions, some of which lasted several days. The VAT helpline told Acrylux that the hire of the property would be exempt from VAT as it was not a commercial property. However, the VAT inspector said the hire of the property was similar to short-term holiday lettings and VAT should be charged at the standard rate.

In both cases the taxpayer could not prove exactly what facts had been presented to the helpline, or exactly what the helpline had given as its advice. If the advice had been requested in writing the outcome for the taxpayer may have been different. If you have a tax question, please ask an accountant (we recommend using Chartered Accountants) before reaching for the HMRC helplines. If you act on advice that later proves to be incorrect, you could pay a high penalty!

Officially the deadline for submitting your 2008/09 personal tax return is midnight on 31 October 2009 otherwise a £100 penalty will be charged.

However, if the return is in the Taxman’s letter box when their offices open on Monday 2 November, the return will be treated as being filed on time.

The return will be treated as late, but no penalty will be charged, if it is in the letter box when the office opens on 3 November 2009.

As receipts are no longer given for hand delivered returns, we recommend you use recorded delivery so that you have proof that the return was submitted on time.

The interest rate for personal bank accounts are often much better than for company bank accounts.  We are often asked if it is possible to temporarily place company funds on deposit in a personal bank account in order to earn a greater return.  This would avoid legally extracting the funds from the company and having to pay personal tax on the amounts transferred into a personal bank account.

This ‘best of both worlds’ can theoretically be achieved if the funds are held by the individual on trust for the company.  However, you would need a formal trust deed in place documenting the situation and which gives the company a legal right to the funds.  Also, you would need to advise the bank that the funds are legally owned by the company in which case we understand that the bank would then offer reduced rates of interest as it would be viewed as a business account rather than a personal account.

So, it is possible but unlikely to be worthwhile if done properly!

Until recently the Taxman treated double-cab pick ups differently for different taxes.  For benefits in kind, they were treated as vans (which is good news) but for capital allowance purposes they were cars (bad news).

Now, sense seems to have prevailed and these vehicles are treated as vans for capital allowances.  This is good news as it means tax relief is available alot quicker.  This new treatment has been backdated to April 2008.

To qualify for this advantageous tax treatment, the double-cab pick up should have a payload of at least one tonne (1,000 kg).

Follow this link for an interesting article on how HMRC select different businesses for a tax investigation and how HMRC gather information on unsuspecting taxpayers.

More than 50% of the PAYE codes we see are incorrect.  Often the Taxman will include adjustments for a taxpayer’s rental income, dividend income and bank interest meaning that your employer will deduct extra tax from your wages to pay the tax on this other income.

We think it is worthwhile exercising your right to have these adjustments removed from your code.  At the worst it will delay the payment of the tax by up to 21 months but if your other income is less than in previous years it will mean you don’t pay extra tax only to have to claim it back from the Taxman several months later.

We are regularly asked about what VAT to charge overseas customers.  Here is our summary for the EU.

Goods sold to customers based in another EU country can be zero-rated if the customer is a VAT registered business.  To ensure your paperwork is water-tight you should quote the customer’s VAT number on your invoice to them and keep a proof of shipping.

If the customer collects the goods from you in the UK, ask for a 15% deposit which can then be returned to them once proof of the export is supplied to you.

Its not usually a good idea to pay tax voluntarily, but sometimes it can be beneficial.

If you’re retiring after 5 April 2010 and you won’t have achieved 30 years of NI contributions required for a full state pension you can buy extra years (up to a maximum of six).

Paying £626 of Class 3 NI contributions will buy you an extra £165 per year of state pension income.  So four years after retirement you’ll have got more money back than you originally paid.