Comic Relief Donations & Gift Aid
Q: I made a donation to Comic Relief last Friday over the telephone and they asked me if I wanted to donate using Gift Aid. How will this benefit me and the charity?
A: From the charities perspective, if you agree to make your donation under gift aid, it will allow them to claim an extra 28% on top of your donation from the HM Revenue & Customs. This means that for every £1 you donate, Comic Relief can claim an extra 28p direct from the Government.
You must give the charity concerned a Gift Aid declaration for any claim to become valid, and if you make your donation orally over the telephone they will write to you to confirm this declaration.
One further requirement when donating under gift aid is that you must pay income tax and/or capital gains tax at least equal to the amount that charities will reclaim on your donations, so if you are not a taxpayer, you cannot make a gift declaration.
You will not receive any benefit personally if you are a basic rate tax payer , but if you are a higher rate taxpayer, you can claim the difference between the higher rate of tax of 40% and the basic rate of tax of 22% on your Self Assessment tax return. Remember to let your accountant know at the end of the tax year of all the donations you have gift aided in the year.
Signing Company Accounts & Tax Returns
Q: My company accounts and corporation tax return needs to be filed soon, but I am actually going to be away on business for both deadlines. Is there anyone else who can sign the documents on my behalf as I am the only director?
A: Unfortunately, if you are filing full accounts or abbreviated accounts at Companies House then there are two sections that need to be signed. In the absence of a director, the company secretary can sign the directors report. However, only the company director can sign the company balance sheet, so if you do not sign this your company accounts will be rejected.
Therefore, you will need to make provisions for your accounts to be signed before your journey to avoid a late filing penalty being issued.
With regard to the Corporation Tax Return, the HMRC guidance suggests that the declaration must be signed by a person authorised to do so by the company, and this includes the company secretary in your absence.
You must ensure that an original signature is used for all of the above documents as a photocopy of a signature is not acceptable.
Amending My Income Tax Return
Q: I rushed the submission of my tax return in January, and have now realised that I left off the interest I received from my bank accounts and dividends paid from some of my shareholdings during the 2005/06 tax year. Can I revise my tax return and will I incur any fines for doing this?
A: Just as the Revenue has the right to repair an obvious error or mistake on a return the taxpayer has the right to amend it, within 12 months of the filing date for the tax return, which in the majority of cases is the following 31 January. The amendment to your tax return may be in the form of a letter detailing the omissions, an amended return, an extra supplementary page that shows the relevant source of income, or an amended supplementary page of one originally submitted with the return.
The Revenue will normally accept an amendment to a return or self assessment under Section 9(4)(b) of the Taxes Management Act, whether it is notified by the taxpayer or by their agent. However, you must ensure the amendment is supplied in writing as it cannot be made over the phone.
No penalties for late filing will be applicable, but you need to be aware that if the amendment results in additional tax to pay you will be charged interest from the due date of payment, which in your case was 31 January, and you will also be liable to a 5% surcharge if this was not paid by the end of February.
Capital Allowances on Taxi’s
Q: I started a private vehicle hire business last year and business has been so profitable that I am now looking to employ my son as a driver and purchase another vehicle. I am looking to purchase a new vehicle for an “on the road price” of £18,000. How is the cost dealt with for tax purposes?
A: The total cost of the vehicle will qualify for Capital Allowances, and assuming it is a “qualifying hire car” it will qualify as Plant and Machinery for this purpose. First Year Allowances will therefore be available on the full cost of £18,000 in the period the vehicle is acquired. If the vehicle is acquired prior to 5 April 2007 it will qualify for a First Year Allowance of 50%. However, if you delay the purchase until after this date it will qualify for the normal 40% First Year Allowance, unless the Chancellors budget changes this in March 2007
A “qualifying hire car” is a car provided wholly or mainly for hire to or the carriage of members of the public in the ordinary course of a trade and satisfies one of the three conditions outlined by the HMRC legislation. Your accountant will be able to provide you with further details on this.
You must also remember to ensure that if your son receives private use of the vehicle, he will be assessable to a benefit in kind based on the CO2 emissions level of the car. Equally, if he receives private fuel in addition to the use of the car, a benefit in kind for this will also be applicable. You will need to produce and submit end of year forms P11d and P11d(b) disclosing these benefits to the HMRC by 6 July after the tax year end in which the benefits are received.
Low Co2 Emission Cars
Q: I am looking to purchase a new motor vehicle for my soletrader business. A friend told me that if I buy a certain type of car I can receive tax relief on the full cost of the vehicle. Is this correct?
A: Cars are treated as assets for tax purposes, and tax relief is given in the form of capital allowances on assets used for your business. This means you do not deduct the full cost, but instead deduct a proportion of the asset’s cost from your taxable profit and reduce your tax bill. For most cars, you deduct 25 percent of the cost per annum on a reducing scale each year.
However, your friend is probably referring the increased First Year Allowance rate available for cars with low Co2 emission. This was one of the capital allowances schemes introduced in 2002 to encourage investment in particular assets, and allows you to claim a 100 per cent First Year allowance on expenditure incurred on new cars with CO2 emissions not exceeding 120 gm/km. The allowance is available until 31 March 2008.
To find out if your new vehicle will qualify for this scheme, you will need to contact the car manufacturer or dealership to check if the Co2 emissions are below 120 g/km. Alternatively, your TaxAssist Accountant will be able to provide you with a list of current low emission cars which meet the criteria for the scheme.
Jury Service Allowances
Q: I have been called for jury service, which will last for approximately 2 weeks. I have had to cancel all of my dental appointments for this period due to my absence from the practice. Do I have any entitlement to claim for the loss of my earnings during my 2 week period as a juror?
A: Irrespective of whether your are self employed or employed, all jurors are entitled to claim a maximum daily allowance for loss of earnings over the period of jury service, which is dependant on the number of hours and period you will be acting as a juror. You may also be entitled to claim a daily allowance for subsistence and travel costs.
As you are self employed, you will have to provide the court with some evidence of the loss of your earnings, and you may need consult your accountant on this. Details of the rates payable can be obtained from the Crown Court where you have been asked to attend, or on the www.hmcourts-service.gov.uk website.
In general, if you receive a financial loss allowance, the payment is usually made for the purpose of filling a hole in the profits of your trade, then this will be treated as taxable receipts of the business. If the payments relates to personal expenditure you incur, such as a daily subsistence allowance then it is not taxable. You local TaxAssist Accountant will be able to provide more details on this.
Extending your property and the Rent-A-Room scheme
Q: I am currently extending my residential property, and building a self contained flat at the rear of my property. I will be looking to rent this out after April for £400 per month. Can I apply the rent-a-room scheme on the income I receive from this extension?
A: The rent-a-room scheme only applies to ordinary lettings of living accommodation in the taxpayer’s own home. Unfortunately you cannot claim this if the rooms are let as an office or for another business purpose.
If a property has been divided up, HM Revenue and Customs will want to satisfy that the part of the house being let, such as your new flat, is part of your main residence or is a separate residence entirely. They will generally allow a claim where the division of the property is only temporary.
To determine this, they consider whether structural alterations are necessary to undo the division, and how long has the residence been divided up. They will also use other factors such as if the property has it own postal address and entry, and is metered for mains services.
If you are uncertain as to whether rent a room is available on your property best to seek advice from your local TaxAssist Accountant.
Tax Free Incentive for Filing Payroll online
Q: I remember last year employers were offered a £250 tax free payment to file their end of year PAYE returns online. Is this still available for the 2006/07 tax year, and how do I register?
A: Yes, HM Revenue & Customs require small firms, by this it means those with less than 50 employees, to start using online filing for their end of year forms P35 by the 2009-10 tax year. (returns due by 19 May 2010). However, to encourage employers to familiarise themselves with the process they introduced tax free filing incentives commencing in the 2004/05 tax year.
Even if you haven’t submitted online before, you can still take advantage of these payments, and if you file your PAYE end of year form P35 for the 2006/07 tax year, (which is due by 19 May 2007) you will receive £150 tax free. Again, if you file online consecutively for the next two tax years will receive a further £100 and £75 respectively.
To qualify for the payments the form must meet HM Revenue & Customs standards and you must therefore use an approved piece of software to file the forms electronically. For details of how to file online, contact your nearest TaxAssist Accountant.
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