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June Question and Answer Corner
Newsletter issue - June 09.
Q. My business requires me to spend up to 100 days a year away from home speaking at conferences. I always travel first class, to allow me to prepare notes on the train, and stay in four-star hotels. The Tax Inspector has said my expenses are excessive and I should only get a tax deduction for the cost of second class travel and two-star hotels. Is he correct?
A. The Tax Inspector is not correct. His own Employment Income Manual at paragraph EIM 31835 says: "The tests that apply to travel expense relate to the nature of the expense and not to the amount." It goes on to say: "You should not refuse a deduction for first class rail travel, if that has been incurred, on the basis that the same journey could have been made more cheaply in standard class". As long as the travel and hotel costs were incurred wholly and exclusive for your business of lecturing the full cost is tax deductible.
Q. I pay income tax at 40%, but my wife and child have no income at all. If I buy fixed income bonds in their names will the interest be effectively tax free, as it will be covered by their personal allowances?
A. When you buy the bonds in the names of your relatives you will be giving them the capital you invest, as they will have complete control of the bonds. There is no limit on the amount you can give to your spouse, although there could be inheritance tax implications. Your wife will be taxed on the interest from her bond, but if this does not exceed her personal allowance of £6,475, there will be no tax to pay. If your child is aged under 18, the interest from his bond will be taxed as part of your income if it exceeds £100 per year.
Q. If I start earning money from a website I have setup in my spare time, will I have to pay tax and national insurance on that income? I am also employed full time on a salary of £25,000 a year.
A. You should register your new web business with the tax office as a self-employed business. We can help you do this if you wish. Your self-employment will not affect your employment, and your employer need not know about your website business. However, you will have to complete a tax return each year to declare all of your income; from your business, employment and any investments. By registering as self-employed you will also be automatically registered to pay class 2 national insurance in respect of your self-employed profits. If these profits are expected to be less than £5,075 for the current year, you should complete form CF10 which is a request for exemption from paying class 2 national insurance.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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