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Education Maintenance Allowance

Q: My seventeen-year-old son is starting college this September and claims some of his older friends get paid an allowance from the government for continuing their studies. Do you know of any allowance available?

A: He is probably referring to the Education Maintenance Allowance (EMA) - a Government scheme which financially incentivises students to stay in full time education. If your son turned 16, 17 or 18 in the school year up to August 31 2008, and is entering a full time further education course at a college or school, or taking an LSC funded Diploma or a course which leads to an Apprenticeship he can claim the allowance.

The amount payable depends on your family’s household income. The thresholds applicable for the forthcoming school year are based on income earned in the 2007/2008 tax year, and are:

•  Household income up to £20,817 per annum receives £30 per week
• Household income from £20,817- £25,521 per annum receives £20 per week
• Household income from £24,851- £30,000 per annum receives £10 per week

If your household income exceeds £30,810 per year your son will not receive any weekly payment.

For more information visit  www.ema.direct.gov.uk  or speak to your local TaxAssist accountant.

A: No liability to income tax arises where an employee provides workplace parking for an employee. This covers parking at or near the employee’s place of work and is allowable for tax purposes whether the cost is met directly by the employer or reimbursed to the employee.

The treatment of costs incurred as a result of the congestion charge is dependent on whether it was incurred whilst on business travel, in which case the payment is tax and National Insurance free, or whether they were incurred during the employee’s ordinary travel from home to work. If so, the payment is subject to Tax and National Insurance through the payroll.

A: The general benefit in kind rules apply if you take an medical insurance policy (which you benefit from personally) through your own limited company, the amounts paid will need to be reported on a P11d. You will pay tax on this personally and the company will be liable to a Class 1A National Insurance charge.  

In the respect of life and critical illness cover, if you benefit personally from the policy this will be a benefit in kind also, as it is treated as a payment made on behalf of an employee.  

However, if the company takes out the policy, the premiums on such a policy will be allowable if the sole purpose of taking out the insurance is to fill a hole in profits that may result from loss of the services of the key person. The only downside is that any proceeds by the company are taxable as trading income.  There are a few execeptions when the policy relates to a director of company, and we would recommend you speak with your local TaxAssist accountant to discuss these.

A: Generally speaking, grants are set against the expenditure for which they were granted. For example, if you receive a grant for advertising, the amount of that grant will be deducted from advertising costs in your accounts, thus increasing your profits, and therefore the tax due on them.

If the grant is for a capital item, such as plant and machinery, then the cost of that capital item (asset) is reduced accordingly (depreciation) for the purposes of calculating capital allowances.

Some grants may be tax-free - and you should always read the small print or conditions carefully, or get your professional advisor to do so for you, before you proceed.

A: Prior to the 2008 tax year, the deadline of 30th September was applicable to taxpayers who did not calculate their own tax liability, and the 31st January applied to taxpayers who did calculate their liability, or engaged a professional advisor to do so.  

For the tax year ending on 5th April 2008, taxpayers can submit paper returns upto the deadline of 31 October without incurring a penalty. Any paper returns submitted after this date will be accepted but treated as late, and may be liable to a £100 filing penalty if the tax liability is not paid by 31st January 2009. 

The changes were implemented to encourage taxpayers to file their tax returns online. Therefore if you are unable to file on paper before the 31st October deadline, you will need to register  and submit your 2007/08 tax return using the HMRC online system or contact your local TaxAssist accountant to do this for you.

A: Provided the au pair is registered with the Childcare Approval Scheme (CAS) in England and you, as the employer, meet the other conditions, you are eligible to receive Working Tax Credit to help with the cost.

If you are employed, you can claim financial support through your own employers supported childcare scheme to fund the cost of the Au Pair.

To qualify to receive tax credits, the childcare must be provided by a carer registered with CAS, in the child's own home or, for children aged over 7, on other domestic premises.

The process for registering the childcarer for the CAS for one usually takes approximately 6 weeks and cost £99. For further information and advice on how to register your childcarer with CAS, together with details of the other benefits provided by the scheme talk to your nearest TaxAssist accountant.

A: For the expendiutre on the number plates to be allowable for tax purposes you will need to justify that there is a benefit to the trade in having such a number plate. If you can, then the company will be able to claim amount you spent on acquiring the right to use the number as an intangible asset.

From April 2002, companies are entitled to tax credits at a minimum of 4% per annum or the depreciation rate applicable to the generally accepted accounting life of the asset if that is greater.

The actual amount spent on the physical plastic number plate is treated as part of the cost of the car and receives plant and machinery capital allowances as normal.

A: By joining your friends exisiting sole trader business as a partner, you are creating a new entity for VAT registration purposes.

We would therefore recommend that to avoid any VAT issues which may arises for a previous period, you should insist on a new VAT registration from the date you become a partner in the business.

For example, if any VAT errors become evident for the period before you joined, if you continue with the same VAT number you both are equally liable for the VAT debt, even though it was relevant to the period when the business was wholly owned by your friend as a soletrader.

In addition to obtaining a new VAT number, it is also possible to draw up a legal agreement to protect against this problem.