At Howards our expert team is available to help you whenever you need it. With nearly 20 years’ experience our firm is the best choice for local advice on business, accounting, tax, and payroll issues. As a successful Stafford firm of accountants, we add value by sharing best practice and advice with those who need it.
Here are some of the most pressing questions that our team of nearly 50 consultants, directors, managers, seniors, semi-seniors and trainees have been presented. If you have a question that you feel others will benefit from knowing the answer, please contact us and we will take a look.
Q: I have just started self-employment, when do I need to notify HM Revenue & Customs of this?
Currently you only need to notify HMRC you are self-employed if your earnings from self-employment exceed £1,000.00 in the tax year.
If you exceed this figure, then to avoid a potential penalty you will have to register your self-employment no later than 5 October after the commencement of your second year of trading.
For example if you started self-employment the 1 August 2020, you will have to 5 October 2021 to notify HMRC.
Q: As a result of the coronavirus pandemic I am re-evaluating how I run my business and have decided to work from home. If I was to have a garden room built in my garden to use for working from home, Could I charge the cost of the build to the business? i.e. pay for it on the business?
You can put the expenses through the company for a garden office. This means that the company would own the office, it would be classed as an asset of the company and not you personally. However, if you were ever to sell your house, you would have to give some money to the company to effectively purchase the garden office from the company.
CONSTRUCTION INDUSTRY SCHEME
Q: I have just bought a house for renting out which requires work doing on it to bring it up to the required habitable standard. Will I have to be registered with HMRC as a contractor under the Construction Industry Scheme for the work done?
If it the work to be undertaken is of a minor nature (for example, painting, electrical work etc.) then you would have no need to register as a contractor, however should the work be more extensive for example changing the floor plan by for example adding an extension or another floor, or converting a property into individual flats then you may fall within the construction industry and we would recommend that you requested further advice before you undertake the project.
Q: I AM A SELF-EMPLOYED KITCHEN FITTER DOING WORK FOR PRIVATE HOME OWNERS, AND AT TIMES I NEED TO USE AN ELECTRICIAN OR PLUMBER. DO I NEED TO DECLARE THESE PAYMENTS THROUGH THE CONSTRUCTION INDUSTRY SCHEME (CIS)?
Where work undertaken is contracted between yourself and a private householder, the work you do will be classified as outside the scope of CIS.
However where you have to subcontract a part of the job to another, this will be treated as a new contract and dependent on the specific work undertaken for that job then it could fall within the Construction Industry Scheme.
For example, if the work undertaken involved the moving of the sink or the installation of additional electrical sockets in a pre-existing kitchen then the work would not fall within the scope of CIS.
However, potential situations where the work would fall within the scope of CIS, would be –
- The electrical work undertaken in the kitchen was part of a contract to rewire the whole house.
- The fitted kitchen was being installed in a new extension to the property. (In this case you could fall within CIS as both a contractor and subcontractor if the extension was contracted to a third party).
Of course, in these circumstances if you were to recommend a plumber or electrician to the householder and they themselves agreed the job to be done, the price and paid them direct, they would not fall within your contract and you would have nothing to report.
Q: Following a household declutter I am selling personnel items online and at car boot sales, will I have to inform HMRC of the income?
Generally for personnel items, there would be no tax to pay, however if you are lucky to sell a personal possession for over £6,000.00 (for example jewellery), you will have to check if you need to pay capital gains on the item sold. There are a number of exemptions from the £6,000.00 rule (as long as they have not been used for business, for example, your personal car or personal items which are classed as having a limited lifespan of under 50 years, for example clocks and watches.
As ‘trading income’ over £1,000.00 does need to be declared to HMRC and HMRC do receive information from online selling sites, we would recommend you keep a written record of your sales, (particularly if they exceed this amount), as HMRC may require you to prove that you were selling just personal goods and not trading as a business.
Q: I have a haulage business. Can you tell me the best way to refund my employees their subsistence payments tax-free whilst they are out driving on business? They only drive in the UK.
There are a number of ways and it depends on 2 main factors are the employees only undertaking jobs where they return at home each night or do, they spend nights away.
Taking the first option, there are 2 ways which their expenses can be refunded, the first is by keeping a record and refunded the cost on production of receipts of any meals/drinks they have purchased.
The 2nd which involves considerably less paperwork is using the HMRC benchmark rates this pays £5.00 for one meal (minimum journey time 5 hours), £10.00 for 2 meals (10 hours or more) and where the journey continues after 8.00 p.m. either an extra £10.00 can be paid (£20.00 total), or if the journey exceeds 15 hours a total of £25.00 can be paid. The only paperwork required for this is evidence of the times the journey(s) were undertaken.
If the business journey starts before 6.00 a.m. then £5.00 can be paid for breakfast.
In regards to overnight journeys, there is a third option and this is the approved overnight subsistence allowance. This used to be straightforward however the rules in regards to operating this have been tightened in recent years, resulting in an increased administrative burden for HGV employers.
For these journeys the employer can pay either £34.90 if the HGV doesn’t have a sleeper cab, or £26.20 when there is a sleeper cab used. The problems with this is that to use these rates you need to obtain an approval notice from HMRC (renewed every 5 years) and you need to have a system in place where you periodically check that employees are incurring expenses for meals/drinks and that the payment is a reasonable sum of the subsistence expenditure.
As an employee could receive £25.00 per day anyway for been away over 15 hours, with a lot less paperwork for both the employer and the employee we would recommend this is the best system to use.
In addition, an extra £5.00 per night tax free to cover any incidental overnight expenses without the need for any records identifying the expenses incurred.
You can of course pay a sum higher than the benchmark rates, however the additional sums paid would be subject to tax and national insurance through the employees’ payroll.
TAX & VAT
Q: One of my employees who rents a cycle from us for use qualifying work journeys is currently working from home. Will he have to return the bike to avoid a benefit in kind.?
No, as long as the employee joined the scheme prior to 20 December 2020, they will not have to return the bike and can still use it for their personal use for example exercise. This will apply until 5 April 2022 when the previous conditions will be reapplied.
Q: I WILL NO LONGER TO BE ELIGIBLE TO BE VAT REGISTERED FROM THE END OF THE MONTH, BY WHEN DO I NEED TO NOTIFY HMRC AND WHAT DATE SHOULD I USE?
You need to notify HMRC of your cancellation request within 30 days otherwise you may get a penalty.
As VAT will strictly apply until 23:59 hours on the last day of the month, (or whatever date you use). The correct notification date would be the day after, for example in your case it would be the 1st of the following month.
Q: I am a self-employed business owner, and thankfully my business has survived the coronavirus crisis but my income was reduced. I have developed some new skills and interests which are beginning to earn upwards of £1,500 this tax year. How should I handle this from a tax/business perspective?
The income from your new business can either go on your self-assessment tax return as other income, or you can put them through your current business as a different trade income. Depending on the level of earnings, you can then review as to what will be the best tax wise.
Q: I am late in notifying HMRC that I have to register for VAT, what are the consequences?
If your registration for VAT is late, (that is 30 days after you exceeded the VAT threshold), you could end up with a failure to notify penalty.
These penalties are based on the reason for the delay, (known as your behaviour), how you help HMRC with resolving the problem and the amount of tax due.
For example, if you had been ill when the 30 days period expired, and you immediately registered when you were well again, you would not incur a penalty as you would be able to demonstrate you had a reasonable excuse.
If you don’t have a reasonable excuse, then dependent on why you had failed to register you are looking at a minimum penalty of 30% based on the tax you owe. However all is not lost, for example if the reason for delay was non-deliberate, you notify HMRC within 12 months of tax becoming due, and you fully co-operate with HMRC you would end up with no penalty to pay.
Q: AS A LARGER BUSINESS i puT IN A FORECAST OF MY profits for this year and have a rather large corporation tax bill to pay. Given that my profits have slumped during the coronavirus crisis, will I be overpaying tax and if so what should I do about it?
UK businesses overpaid £9bn in corporation tax last year. This is a 12.4% increase on the previous year. Could you have been one of them? Moreover, the CT you pay this year is even more likely to have been overpaid, given the slumping profits during lockdown.
Many larger businesses are required to pay CT based on forecast profits for the forthcoming year and are thus likely to overpay if profits suddenly fall. If you made estimates of your profits prior to lockdown, you may well have overpaid, you should revise your estimate and adjust your payments. In addition, any losses you make this year can be carried back to reduce liabilities- so you should be claiming a refund.
With CT instalment payments there is no system for overpayments to be refunded automatically. So if you don’t proactively claim a refund, HMRC could hold on to your money. It might be best to file your year end tax return as soon as possible as this will speed up the process of reclaiming an overpayment. Where the tax return has not been submitted the process becomes more tortuous.
Q: ONE OF MY EMPLOYEES HAS A COMPANY VAN PROVIDED FOR BUSINESS JOURNEYS ONLY, THERE IS A PROHIBITION ON PRIVATE USE IN PLACE AND HE KEEPS MILEAGE RECORDS. HE HAS ASKED TO USE IT WHEN HE MOVES HOUSE? ARE THERE ANY TAX CONSEQUENCES IF WE ALLOW THIS?
Even though there is a prohibition in place on private use of the van, some private incidental use is allowable.
Incidental private use can be a difficult to interpret as the general rules are
- it only taking place a few days per year.
- the use is intermittent and irregular.
- does not follow a regular pattern.
- the use is insignificant when taking into account the overall use of the van.
For example you may think using the van for a week’s holiday would be insignificant, however that is not the case, and this would lead to a van benefit being charged.
HMRC do supply some examples of what they class as insignificant private use for example calling at a newsagent on the way to work, a trip to the dentist or a trip to the tip once or twice a year to take rubbish.
As long as permission was obtained first from you, the house move was local and it was dealt with in a day, we would consider the conditions were met and therefore no tax or national insurance would be due.
Q: For our company cars what is the best method to use to avoid a car fuel benefit charge being due?
There are 2 methods to avoid the charge, both using the same principle of the company car driver keeping comprehensive business/private mileage records.
The major difference is as to how any business/private fuel used is provided in the first place. If the company provides all the fuel then the director/employee needs to repay the private miles undertaken at the advisory fuel rate. If the director/employee pays for all the fuel, then the employer will refund the business miles at the advisory rate.
As a fuel benefit charge becomes available even if 1 mile of private mileage is paid for by the company, (for example if a business journey was re-classified as ordinary commuting), we would always recommend the second option, as any payment refunded incorrectly would be treated as a taxable expense.
Q: I am about to take a new member of staff on and before I do I want them to undertake an unpaid work trial. Can I do this?
Yes, you may be able to undertake an unpaid work trial for the employee, however there is nothing in the legislation that states exactly how long a work trial should last, before the work should be treated as employment subject to the National Minimum Wage (NMW).
Factors which should be considered if a work trial is to become paid employment include–
1. The length of the work trial, should not exceed the length of time for the employer to test the person’s ability to do the job. This could be as little as 1 hour; in most cases the unpaid trial should not last longer than a day.
2. The extent to which work trial is observed.
3. How do the work trial tasks relate to the job offered?
4. Do the tasks undertaken offer value to the employer and exceed the actual test needed for the job?
5. Can the trial be shown as a way that the employer is trying to reduce their costs?
Whilst there are potential administration costs by treating the work as employment, due to the fact if you did get this wrong, (HMRC National Minimum Wage enquiry or employment tribunal), we would recommend it would be cheaper to operate the NMW for the hours if you are not certain the trial would meet the necessary tests ultimately to the satisfaction of a tribunal.
Q: As my multipurpose company van has now beEN classed as company car I have disposed of the vehicle. I am considering replacing it with a double cab pickup. Are there any tax benefit implications I should consider first?
Yes, for a double-cab pick up to be treated as a van rather than a car, then it must have payload (the gross vehicle weight (GWT) of 1 tonne (1000 kg) or more.
What you must consider is what you will be using the double cab pickup for? If you are considering that you will need a hard top on the rear ‘open’ area, then you need to factor the weight of the top and subtract the weight from the GVW.
The weight of a hardtop (either metal, fibreglass or other similar material) has been agreed between HM Revenue and Customs and manufacturers to be 45kg.
For example should the double cab pickup have a GWT of 1,025kg as standard and then a hard top is added, the GWT will be classed as 980kg and the vehicle will be treated as a company car rather than a van.
Q: One of my employees on the trade counter who is on the national minimum wage has asked if he can purchase goods at a cost and have the payment deducted from his wages. Are there any implications from this?
Yes, there are, even though as an employer you will not profit from the transaction and the employee has agreed to this, the deduction will be treated as a benefit to the employer and therefore will reduce the earnings below the National Minimum Wage.
Should however the employee purchase and make payment direct to you from the wages he has received, this would not result in you paying below the minimum wage.
Q: What records will I need to ensure my claim to the small business grant was correct?
Firstly, if you are in receipt of the Retail Hospitality and Leisure Grant, you will not be able to claim the small business grant claim as well.
As there are few exceptions for the small business grant to be invalid. (These include car parks/spaces a liquidated dissolved company prior to 11 March 2020 and any property occupied for private use which can be inherited which can include private stables, beach huts and moorings). You should not need to keep any additional records to those that you would have previously kept. For example if you rent business premises, such as a serviced office or shop premises, then the rental agreement and records showing you have made payments will suffice.
Don’t forget any grant will qualify as part of your De Minimis State Aid allowance.
q: What records do I need to keep to ensure my claim to the Self-Employed Income Support Scheme (SEISS) is correct?
There are 2 grants made under the SEISS and for both of them to apply you will have to demonstrate you will were adversely affected financially by COVID 19.
Whilst the same criteria applies to each grant, the timing of eligibility does have a bearing on which grants you can apply for. The first grant covers the period from March 2020 to 13 July 2020. The second grant covers the period from 14 July 2020 until the 19 October 2020.
Whilst health matters and a reduction in your work could lead to you being financially impacted. Don’t forget that if you have had an increase in costs due to the pandemic, then this would also lead to you having a valid claim. Such additional costs could include having to buy protective equipment to ensure you can trade following social distance rules.
The records we would recommend you keep are –
- Shielding letters – If you have had to shield or haven’t been able to work as you have had caring responsibilities due to COVID 19.
- Any NHS correspondence or a record of the dates if you have been incapacitated or have had to self-isolate due to COVID 19 and unable to work.
- Bank statements, business accounts which show a downturn in your turnover.
- Confirmation of any coronavirus related business loans received.
- Emails/letters if you have any work cancelled/delayed, or payment has been delayed.
- Dates that your business was closed due to lockdown restrictions.
- Invoices/receipts of all protective equipment purchased.
Finally don’t forget the grants are treated as income for tax purposes and will need to be included as such in your tax returns for the accounting period in which they were received.
Q: I am worried someone may have set up a limited company in my name and fraudulently received Coronavirus Loan. Can I check if any company has been set up in my name?
Yes you can check digitally. Just go to Companies House website at the following link (https://find-and-update.company-information.service.gov.uk/ ) and type in your name. Should you unfortunately find an entry using your name, which doesn’t belong to you, then immediately contact companies house by email email@example.com or by telephone on 0303 1234500 between the hours of 8.30 a.m. and 6.00 p.m. Monday-Friday.
We would also recommend that you immediately report the fraud to ActionFraud -https://www.actionfraud.police.uk/
RETIREMENT & PENSION
Q: I have reached 60 and have just taken early retirement. How will this affect how much state pension I will receive?
It all depends on your National Insurance record. For you to receive a state pension you need to have qualifying contributions for at least 10 years up to a maximum of 35 years. These contributions can come from National Insurance paid or credited whilst you worked, credits if you were un-employed and signed on or if you were ill, a parent or a carer.
Q: I am thinking of popping a lump sum into my pension through my company before my financial year end. Will this affect my corporation tax?
Yes any payments into your pension will reduce your corporation tax liability, however, you can’t contribute more than £40,000 in one tax year.
NOW IT'S YOUR TURN
Have a pressing question that you think others would benefit from knowing the answer to? Please get in touch.
Pose your own question to our experts
Get in touch with your own question
Have a pressing question that you think others would benefit from knowing the answer to? Please get in touch.