September Question and Answer Corner

Newsletter Issue - September 2009

Q. I operate my own company from a room in my own home, and charge the company a small amount of rent for the space it uses. Can I claim rent-a-room relief for that income on my personal tax return?

A. The law says this tax relief can only apply where rent is received from letting 'furnished accommodation in a residence', where that residence is the taxpayer's own home. Although the law doesn't say that the let room itself must be used purely for residential purposes, that is how the Taxman interprets the law. The Taxman says that letting a room as an office does not qualify for the rent-a-room relief, and he will not budge from that view until a taxpayer wins a case on those grounds. So although the law is silent on the matter of what the let room must be used for, the Taxman is clear that he will not agree to rent-a-room relief for office space.

Q. I am a self-employed fitness instructor and I teach classes at a number of locations. What records do I need to keep regarding my motoring expenses?

A. If your turnover does not exceed the VAT registration threshold (currently £68,000), you have a choice as to how to record your motoring expenses. When you use your own car for business journeys you need to note down exactly the number of miles driven. The choice is then whether to charge those journeys to your business at the standard rate set by the Taxman: 40p per mile for the first 10,000 miles per year, and 25p per mile for additional miles, or at the actual cost of using your car. For the actual cost method you need to record the total cost of all costs related to your car from fuel to servicing and any loan interest costs. This total cost is then split between business and non-business parts based on the total business miles driven in the entire year. You should also record any additional costs such as parking or tolls.

Q. My company is likely to fold soon leaving a number of debts including PAYE and VAT owing. Can HMRC demand that I pay those taxes personally after the company closes?

A. Anyone who was a director, manager or company secretary of the company, can be landed with a personal liability notice (PLN) for unpaid NI that was due from the company. The Taxman does not issue a PLN very often, but he will do so if he believes the company intentionally avoided paying NI. A similar power can be used to collect PAYE tax payable by the company, from the directors. If the Taxman believes the company has fraudulently avoided paying VAT he can transfer any VAT penalties to the directors or managing officers of the company.

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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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk