The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley LS29 6JA
Tel: 01943 870933
Fax: 01943 870925
You are self-employed. Can you claim relief for the cost of travelling between home and your place of work?
The answer is – it depends.
If you are an itinerant worker you can claim. An itinerant worker is one who has no fixed place of work. An example might be a domestic plumber. He moves from customer to customer. He does not have a regular place of work.
For our plumber every journey between home and a customer’s premises is a business journey, the cost of which can be claimed.
What if you are not an itinerant worker? What if you work regularly at one or two sites as well as at home?
In the recent Upper Tier Tribunal case of Dr Samadian it was held that the cost of travel between home and the two hospital sites at which he worked as a self-employed consultant was not deductible. This was so even though the tribunal accepted that the doctor worked from home. The tribunal came to its decision because the expenditure was not laid out wholly and exclusively for the purposes of the doctor’s trade or profession. The doctor’s objects in making the journeys were (1) to enable him to do his work and (2) to enable him to live away from it. The presence of this second object meant the wholly and exclusively test was not met.
It remains to be seen whether the doctor, perhaps backed by the wider self-employed community, takes his appeal further.
Our Advice: This decision will prompt a significant number of self-employed people and their advisers to consider their claims for travelling expenses. We expect HMRC to make more enquiries into claims for travelling expenses by non-itinerant workers.
BETTER OUT THAN IN?
HMRC likes to get people with simple affairs out of self-assessment.
Taxpayers who receive a letter from HMRC informing them that they are being removed from self-assessment enjoy a feeling of relief. No more tax returns to fill in!
But when you are outside self-assessment can you be sure you are paying the right amount of tax?
A former client of mine who was removed from self-assessment by HMRC has just received a tax calculation for the year 2010-11. It shows he has underpaid by £2,381. This is not unusual. I have come across many similar instances over the years.
Our Advice: If you receive a letter from HMRC informing you that they are removing you from self-assessment, enjoy the moment. But do make a point of checking every PAYE tax code you receive to make sure you are getting the right amount of allowances and that any code adjustments are correct. Also, with help if necessary, carry out your own year-end calculation to check you have paid the right amount of tax.
Leeds City Council charged VAT to the users of certain of its services. It later found out it was wrong to do so. It applied to HMRC for repayment. HMRC repaid some of the money but refused to repay that for which the Council’s claim was too late.
The Council appealed on the basis that the three year time limit for bringing claims was in breach of various European Union principles.
The Upper Tier Tribunal threw out the Council’s claim.
So what do we have here?
We have two public sector bodies squabbling over money that was taken, illegitimately, from private individuals and businesses.
Does anybody win in this fiasco? Er, yes, one Julian Ghosh QC, his two assistants and a firm of solicitors who all represented the Council.
Thank your lucky stars you don’t live in Leeds.
Here is an action point for you if you missed the 31 January 2014 deadline for filing your 2012/13 tax return. Your next filing deadline is 30 April 2014. It is likely that in the days leading up to this date you will receive a notice from HMRC informing you that it will fine you £10 per day until the return is filed. Interestingly, if you are a member of a partnership which has not filed its partnership tax return this regime applies here too. £10 per partner per day. Ouch.
The tax year ends on 5 April 2014. If your total income amounts to between £100,000 and £118,880 you pay income tax at a marginal rate of 60%. It follows that for every £1 by which you reduce your total income you save 60p in tax. What more encouragement could you ever need to put money into a personal pension?
Is inheritance tax a concern? Everybody gets an annual exemption of £3,000. If you don’t use it you lose it. So if you want to use your 2013/14 exemption make sure you do so before 6 April. If you didn’t use your 2012/13 exemption it is not too late to do so but in these circumstances you must give away £6,000 before 6 April as the exemption is used on a last in first out basis.
Another use it or lose it exemption is the capital gains tax annual exemption. For the tax year 2013/14 the exemption is £10,900. With asset prices having recovered in recent years you might hold investments which stand at a gain. Your plans might involve selling those investments in 2014/15. But if you make all your disposals in that year your gains might exceed the limit. So why not dispose of some now and some later? In that way you use two years’ exemptions and save tax. By way of icing on the cake you might also consider transferring your investments into joint names with your wife, husband or civil partner before making the disposals. By doing this you capture more annual exemptions and save more tax.
March is the month of the budget. Looking back though old newsletters my eye was caught by my Fantasy Budget of 2003. I ended my piece “Will it happen? Dream on.”
My number one wish in 2003 was for the abolition of all compulsory national insurance contributions. Eleven years on I have to admit I have tempered my wish somewhat. I just can’t see an alternative to retaining employer’s national insurance contributions. Multi-nationals come here and enjoy the benefits of trading here and pay very little tax but the one tax they do find it hard to avoid is employer’s NI.
I still dislike employer’s NI so I welcome the government’s move to cut the cost of this tax for all employers by up to £2,000 per annum with effect from 6 April. This is a welcome boost for small employers in particular.
DARK IN HERE
A woman takes her lover home during the day while her husband is at work. Unbeknownst to her, her nine year old son is hiding in the closet. Her husband comes home unexpectedly, so she puts the lover in the closet with the little boy.
The little boy says, "Dark in here."
The man says, "Yes it is."
Boy: "I have a football."
Man: "That's nice."
Boy: "Want to buy it?"
Man: "No, thanks."
Boy: "My dad's outside."
Man: "OK, how much?"
Some weeks later it happens again.
Boy: "Dark in here."
Man: "Yes, it is."
Boy: "I have some goalie gloves."
The lover, remembering the last time, asks the boy, "How much?"
A few days later the father says to the boy, "Grab your things. Let's go outside and play.”
The boy says, "I can't. I sold them."
The father asks, "How much did you get for them?"
The son says "£750."
The father says, "That’s outrageous and shameful. I'm going to take you to church and make you confess."
They go to church and the father makes the little boy sit in the confession booth and he closes the door.
The boy says, "Dark in here."
The priest says, "Don't start that **** again!"
Copyright: K P Bonney & Co LLP 2014. All rights reserved. No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers. Disclaimer: The publishers have taken all due care in the preparation of this publication. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.
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