On The Spot Blogs
Top Five Most Common Tax Queries
Today is the last day of the 2016 tax year and you may be interested to hear the most common tax queries our clients have asked during this tax year. Admittedly, it's not too scientific, but we hope it gives you an idea.
1. Pool Car - Can my car be a company pool car?
Unfortunately, probably not. If the car is taken home overnight by any member of staff, or you, it's unlikely to be a pool car. If it's taken to your staff's home overnight ready for an early start to get to a meeting away from the office, this is acceptable but it's not expected to be a regular predictable event. It's probably more tax efficient to keep the car in your personal ownership and charge your company 45p per business mile.
2. Home Office - Will this mean capital gains tax is charged on my home when I sell it?
Probably not. If your home office is a room also used for some personal reason eg storing personal files or books, or having a sofa bed for visitors, there is no effect on the tax free status when selling your home later, as long as your home is your main residence throughout.
3. Lunch - Can I claim the cost of lunch when working away from my office on business?
Yes, as long as the journey is for business and you're away from your office base long enough to need a meal, the rule of thumb being 5 hours away, then all costs associated with that journey are business costs as a sole trader or limited company. This might be coffees or meals, such as lunch. There's no actual upper limit that may be spent, after all your business will still suffer most of the cost, but be prepared for it to be viewed as a private event if you have oysters and champagne!
4. Salary - What salary should I take from my Limited company?
For the last tax year, a common salary was £671 per month. This is the maximum that can be paid before national insurance is due, but at the same time still accrues a state pension credit plus some S2P credit. Overall, a very good deal. Where clients don't have any other income and few staff so they have enough of their £2k Annual Employer Allowance available, it's been tax efficient to take a higher salary of £883 per month. There's still some employee national insurance due but overall it saved £203 per director during the year. For the new tax year, similar considerations apply except the now £3k Annual Employer Allowance is only available if there's more than director.
5. VAT - If I become a Limited company will I have to be VAT registered?
No, as long as your turnover is less than £82k (now £83k). Similarly, being a sole trader doesn't exempt you from being VAT registered. The VAT registration threshold applies in exactly the same way to sole traders, partnerships and limited companies. However, depending on your business, you may want to be voluntarily registered. And if you sell electronic services eg Apps or automatic downloads to the EU the £82k threshold is irrelevant when selling into other countries and local VAT (not UK) has to be paid. We therefore make sure we understand your business to ensure opportunities and obligations aren't overlooked.