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February Question and Answer Corner
Newsletter issue - February 07.
Q. Can I reclaim VAT on car parking charges without a VAT invoice?
A. Yes you can if it is under £25 apart from on-street meter parking which is outside the scope of VAT. In addition, no VAT invoice is required to reclaim VAT on single transactions under £25 for any of the following...
- Phone calls from public or private telephones.
- Purchases from coin operated machines.
- Road tolls.
Q. We've signed up for a lease and have got a rent free period in exchange for doing work on the building. What's the tax position?
A. Rent paid normally counts as a deductible tax expense but in general improvements of a capital nature to a building will not give you any tax deduction. However, it may be possible to classify some of the expenditure as repairs if it is of a repair nature as opposed to being of an improvement nature and so claim a tax deduction for that. If the building is an industrial building you may be eligible for Industrial Buildings Allowances which will allow you to claim a small part of the cost each year spread over many years. An alternative way to speed up the process of getting a tax deduction is to take the whole amount of rent you will pay over the lease term of say 10 years and divided this by 10 and claim this amount each year including the first year, as opposed to claiming the amount paid each year.
A final option would be to get the landlord to still charge you the rent and then you recharge him for the improvement costs. The landlord will however be in the same position of any improvement costs not being tax deductible and if you are VAT registered you will have to charge VAT which the landlord will only be able to recover if he is VAT registered.
Q. I understand that an effective tax strategy for an owner managed company is for the director to take a low salary with minimal national insurance and to take everything else in dividends. However, is there not a problem with the minimum wage legislation?
A. The Taxman has made it clear that the minimum wage legislation only applies when there is an explicit contract of employment between the company and the director. Therefore, to avoid the minimum wage legislation it is simply a case of ensuring you do NOT have such a contract in place. In most small companies this would be the position anyway. When adopting this strategy you must ensure proper procedures are followed when paying dividends or there is a risk of it being attacked by the Taxman. It's also the case the the minimum wage legislation doesn't apply to family members but in the case of a Limited Company it does not have any family members and so to keep the salary of a spouse at a low level you should consider making them a director.
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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