Q: I am thinking of sending my youngest son to a private school. The school fees are going to be in the region of £10,000 per annum and on the correspondence I have recently received I noticed the school states that it is a registered charity. Does this mean that the payments I make for the fees each year qualify for tax relief under gift aid?
A : The school has become a registered charity so it can reclaim basic rate tax on the donations it receives on qualifying gift aid payments made from United Kingdom resident individuals and companies.
Unfortunately, outright payments to a charity in return for services, rights or goods are not gifts, and do not qualify for gift aid. The Inland Revenue specifically state in their gift aid guidance booklet that “Payment of school fees for a specific person do not fall within the gift aid scheme” so your £10,000 will not qualify for relief.
Recent changes to the Inland Revenue and Customs & Excise websites.
Q: I have read previously that the Inland Revenue and Customs and Excise were merging, but have heard nothing regarding any changes recently. Have any changes been implemented yet?
A: Yes, one of the first changes to take place is the Inland Revenue and Customs & Excise websites being replaced a HMRC website ( www.hmrc.gov.uk) with effect from Monday 18 April 2005. This brings the contents of the two websites together under a similar style. Redirects will be in operation to ensure a smooth transition for all users to the new HMRC website.
Further changes to procedures will be detailed on www.hmrc.gov.uk/news section in the forthcoming months.
Previous Accountant holding on to records
Q: In 2003 I started my own business, and ask a local accountant to deal with my Bookkeeping, VAT returns, Income Tax Return and Accounts. I recently received his bill for the 2003/04-tax year, which double the amount I had anticipated. I cannot afford to pay the fee in full, and have offered to give my old accountant 2 post-dated cheques to settle my account.
I've recently changed to a Tax Assist accountant, who I now feel is giving me value for my money. However, my old accountants are refusing to let me have my books back until I've fully settled my accounts.
A: On the assumption that your previous accountant had made it clear to you at the outset what his charging structure would be, and you agreed to his terms, then yes, your accountant is perfectly entitled to retain your records while his fees are unpaid (technically, the right to retain records is called a lien). You would have to show that he was negligent or dishonest in his dealings with you to avoid that result.
You can request his Professional Institute to get involved if you feel you have been overcharged, and they may review the case. You can also ask the Institute to pressure him to return your records. Your new accountant can also write to the old ones advising them that the retention of records may prevent the completion and submission of your returns for the deadline. They could also mention that this may result in penalties or interest being incurred as a result of their refusal and they could be held responsible for meeting these. Also the fact that you have offered to pay the outstanding fee in instalments is much more favourable than refusing to pay at all.
Temporary employment in the UK for a Foreign National.
Q: I have just arrived in the UK from Brisbane in Australia. I will be living and working in the UK for approximately 5 months over the summer months at a holiday camp. My employers advised that I would be paying UK income tax on this employment income. I thought I wouldn’t have to pay any tax in the UK, as I am Australian and only here for 5 months? If I do, how do I claim back my tax rebate for this period of work before I leave at the end of October?
A: As a UK based employee you will be subject to the standard deduction of Income Tax and National Insurance under PAYE.
Before you leave the UK you should obtain a form P85 from the Revenue & Customs. As you are a commonwealth citizen you can claim the normal UK personal tax allowance, which for the 2005/06-tax year is £4,895. This allowance will refund some or all of the UK tax that you have suffered from the 6 April to the date of departure from the UK.
Private hire vehicles – tax treatment
Q: I started a private hire business on 1 January 2005 aiming at the executive market. I have purchased a new vehicle for a total cost of £50,000 that is exclusively used in the business on the same date. 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. First Year Allowances will be available on the cost in the period the vehicle is acquired, and as the vehicle was acquired prior to 5 April 2005 it will qualify for the increased 50% allowance if your business was small.
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 on the HMRC website www.hmrc.gov.uk/manuals/camanual/CA23510.htm
Business mobile phones calls made by employees
Q:Due to the nature of my business some of my employees are required to be on call 24 hrs per day, and consequently use their personal mobile phones to make business calls. How should I reimburse these employees for the cost of the business calls they make?
A: Where this is the case, Class 1 NICs and tax are payable via PAYE if you;
- reimburse the cost of the mobile telephone, service charges or the cost of private calls
- provide the employee with a voucher for use in relation to the mobile telephone or private calls made on it.
Where you reimburse the costs incurred by an employee in making business calls only on his or her own mobile telephone, you can ask for a dispensation. If you do not have a dispensation you must return the full cost to you on form P11D at section O. No Class 1 or Class 1A NICs are payable.
An alternative option you have is to provide these employees with a mobile telephone and enter into a service agreement with the telephone company there is no liability for NICs or tax. This applies to the provision of the telephone, the service and all calls.
Reimbursement of VAT on fuel purchase by employee
Q: I own a company employing a large number of drivers, who sometimes incur fuel costs personally whilst out on business in company vehicles or are paid a mileage rate for using their own vehicle for business. One of my staff members has advised me that they have recently heard that I cannot now reclaim VAT on the fuel element that is reimbursed to my employees. Is this true?
A: EU judges have recently rules that the VAT regulations that allow businesses to claim back VAT on fuel purchased by employees is illegal. Under current VAT regulations employees either submit a petrol receipt or are paid a mileage allowance. The business then recovers 7/47ths on the deemed fuel element of the mileage allowance per mile, based on the engine size of the vehicle.
The judges ruled that the current regulations are inconsistent with the 6 th Vat directive that allows VAT recovery on mileage for business and private use. Also, a prerequisite for VAT recovery is that the petrol receipts should be in the name of the business, and this is unlikely to be the case.
Customs are currently considering the position and in the meantime have stated that they will not change their current practice of allowing for businesses to reclaim the VAT element on the claim.
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By TaxAssist Direct Ltd. Both answers and advice are offered strictly on the basis that no legal liability is created thereby. Personal circumstances may vary and TaxAssist Direct Ltd advises that individuals seek personal professional advice in all situations.
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