The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley LS29 6JA
Tel: 01943 870933
Fax: 01943 870925
NEW YEAR TAX WORKOUT
Here we are at the start of a new tax year. For the country the economic outlook is uncertain and for each of us individually we face downward pressure on our income and upward pressure on our expenditure. So what better time than the beginning of a new tax year to carry out a tax health check?
Each of the following bullets is a potential tax saving idea for you and your family.
Income equalisation / intra spouse transfers
Individual savings accounts (and Junior ISA’s)
Stakeholder pensions for minors
Income deferral (no 50% tax rate in 2013/14)
Venture capital trusts
Enterprise investment schemes (and the Seed enterprise investment scheme)
Capital gains tax
Use of annual exemption
Use of spouse’s annual exemption / intra spouse transfers
Business ownership and entrepreneur’s relief
Realising tax free gains / Seed enterprise investment scheme
Normal expenditure out of income
Potentially exempt transfers
Business property relief
Our Advice: There is a host of allowances and exemptions out there. In order to make the most of some of the tax breaks you need to act early in the year. For others it is better to wait until you have a clearer idea of your outcome for the year.
Early action on the income tax measures is particularly important as 2012/13 is the first year in which entitlement to child benefit is dependent on income levels.
If you would like me to explain any of the bullet points please give me a ring.
FOR CHARITY’S SAKE
A charity needs to raise £1. In order for the poor man to get £1 in to the hands of the charity he must give £1. In order for the rich man to get £1 in to the hands of the charity he need only give 50p. By one means or another, the charity gets the other 50p from the general body of taxpayers. In other words, it gets it from you and me.
Is it right that you and I should have to dip into our pockets to find the 50p to indulge the rich man’s pleasure?
Is it fair that the cost of giving is so much higher for the poor man than the rich man?
Who is better qualified to decide how to spend taxpayers’ money – the government or a combination of philanthropists and charities?
In the furore which followed the recent announcement of a consultation on a limit on tax relief for large charitable donations these important questions have been overlooked.
The headlines have concentrated on how charities will lose out because the rich man, deprived of 50% tax relief, will give less.
“We need a pound. It used to cost you 50p for us to receive a pound but now it is going to cost you a pound.”
Well, welcome to the world of the poor man.
This is how it feels if you give for charity’s sake.
Got to say I am with Osborne on this.
Hold your nerve George.
TOILETS BLOCKED BY HMRC
Where money is spent on the fabric of a building or on fixing things to a building there is often uncertainty as to whether the expenditure qualifies for capital allowances or not. Expenditure on items which are mere ‘setting’ such as floors and walls does not generally qualify for allowances. Expenditure on items which are ‘apparatus’ such as toilets and boilers generally does qualify.
The Upper Tax Tribunal has just held that expenditure on the partition walls which form the cubicles in the toilets at J D Wetherspoon’s does not qualify for capital allowances.
J D Wetherspoon’s tried but failed to convince the tribunal that the partitions performed a function in their trade.
So next time you are using the facilities at your local hostelry consider sharing this knowledge with your fellow users. Or maybe not.
BUT ART IS PLANT
Back in the eighties Scottish & Newcastle Breweries was successful in claiming that artwork adorning the walls of its pubs was plant. Accordingly the expenditure qualified for capital allowances.
The rationale behind the decision was that whilst artwork is not functional in the same way as a beer pump or a fridge, it is functional in the context of a hospitality business in that it creates ‘atmosphere’. Pubs with atmosphere perform better than those without.
But can the same argument be extended to a business whose main concern does not involve creating atmosphere? Could, for example, an accountant claim capital allowances for the cost of a painting on his or her office wall?
HMRC consider not, because selling atmosphere is not part of an accountant’s business.
But in a recent article, Ray Chidell, a recognised expert on the subject of capital allowances, argues that HMRC’s view is wrong.
It is necessary to go back in time and work forward. Case law pre-dating the Scottish and Newcastle case gives a broad definition of plant – “whatever apparatus is used by a businessman for carrying on his business – not his stock in trade which he buys or makes for sale but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in the business.”
That is the starting point for deciding whether expenditure qualifies.
There is nothing in the broad definition or in the Scottish and Newcastle case to support a contention that creating atmosphere is a pre-condition for claiming capital allowances.
So art is plant.
I feel an office make-over coming on.
Our Advice: If you intend to buy artwork to adorn the walls of your shop, office, surgery or showroom make sure you claim capital allowances on your outlay. If you have incurred any such expenditure in the last four years and have not claimed capital allowances make your claim before it is too late.
Be aware this is not an outright win. When you eventually sell the artwork or when you take it into private ownership the business will have to account for VAT (if VAT registered) and the capital allowances will be clawed back. The size of the tax impact at the time will depend very much on the value of the artwork.
Donny Dog, the Doncaster Rovers’ mascot, went into the telegram office, took out a blank form and wrote “Woof. Woof. Woof. Woof. Woof. Woof. Woof. Woof. Woof.”
The clerk examined the paper and politely informed the mascot, “There are only nine words here. You could send another woof for the same price.”
“But,” the mascot replied, “that would make no sense at all.”
Copyright: K P Bonney & Co LLP 2012. 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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