Category Archives: Tax

Tax and travel within the NHS

Notes which i recently prepared for one of our clients in the medical world.

Travel expenses – what can be claimed and how it works. Reference within the NHS

Travel to a temporary workplace is allowable and you can claim

45p a mile up to 10000 miles

25p a mile thereafter.

Also ancillary costs such as parking.

The question is what is a temporary workplace.

Key test 1. Place of employment where you expect to work for 24 months or less
Key test 2. Or it takes up less than 40% of your working time. E.g. Say one day a week.

What it is not

It cannot be your only place of work. So for instance if you accepted a 6 month contract at another hospital then that is a new place of work and a new contract – this is not temporary for tax.It is a permanent workplace which only lasts for 6 months.

Examples within the NHS which are relevant.

  1. Employed at one hospital on a permanent basis and then asked to cover 6 months at a satellite hospital whilst remaining in the same employment. This 6 month period should be classed as temporary.
  2. If there was a new contract with a new employer for the satellite site then this is not classed as temporary. This is why a lot of trainee GPs cannot recover their rotation travel.
  3. It cannot apply to travel incentives to take up a new position however short.
  4. It cannot work for bank work at another hospital if that means you have a second employer. So for instance you are employed at Kings but do bank work at Royal Surrey. In this case you would have 2 employers one is full time, one is part time but neither are temporary.
  5. However in example 4 if the bank work was at a satellite site for Kings ie you were paid for both jobs on the same payslip or two payslips but the same employer reference then the bank work would be temporary.


How will your employer treat the travel?

It depends. Some will recognise that the travel is allowable and will either not tax the payments when they reimburse the mileage or they will tax the excess over 45p a mile. You then have the opportunity to reclaim the element which they have not paid you. For instance they pay 24p a mile then you can reclaim another 21p a mile to make up the full 45p. With these payments they often show with the code TASNT on the payslip.

Sometimes the hospital will wither say they think it is not allowable or they do not want the risk of getting it wrong. So they tax all the payment and leave it to you to claim the fulle 45p a mile. These often show with the NP coding.

The core legislation. Here

And whilst the legislation has just a couple of pages the HMRC booklet (basically their views) has some 77 pages.





Subbies and tax refunds

Are you a subcontractor in the construction industry?

Do you understand the tax rules and why you have tax deducted from your pay? Do you understand how you can reclaim some or all of the tax?
These Q&As will help guide you through the world of CIS deductions.

1. What is CIS?
Basically the government was worried about construction industry workers not paying their taxes. Their answer was to require any payments to anyone other than a company or someone in employment to have deducted before the monies are paid.
You are paid for the work you do less tax. There is a very good chance that you will be able to reclaim a large percentage of this tax.

2. What percentage is deducted?
There are three rates which could be used:
30% if you are not registered with the tax man as a subbie.
20% if you are registered.
0% if you are an established subbie and meet certain requirements.

3.Why are there usually refunds?
The 20% or 30% deductions are made to all payments which you receive. Even those which cover materials you may have bought for your work. Every person is entitled to a personal tax allowance. Let’s say this is £10,000 ( 2014/15). In this case you are likely to have overpaid by £3,000 ( 30% tax deducted ) or £2000 if 20%.
If you spend £1000 on materials,clothing and other allowable expenses then there will be another £200 to £300 due back.

4.How do i claim my tax refund? 
The easiest way is to complete your tax return as soon as the tax year is ended ( after 5th April).
This can be done online.

5.How much does this cost if i ask an Accountant to do it?
The basic cost should be just over £100 for a simple return done early in the tax year (basically accountants don’t like everyone asking for their returns to be done in January the last month before penalties start to be charged). However you do need to be careful as some accountants will charge a percentage of the refund or maybe ask an unusually high fee. We see prominent online services asking £300 plus for the basic return.

Subbie refund summary

Register with the tax man – this means you will have 20% deducted and not 30%.

Keep all the payment advices as they will back up your claim for a refund.

Make sure any tax deductible expenses such as materials,safety wear and appropriate travel is claimed.

Complete your tax return as soon after 5th April as possible. No point in delaying.

Direct v Indirect taxes

Many times you come across references to direct and indirect taxes. But what is the distinction?

Direct taxes
Income tax
Capital gains tax
Corporation tax
Student loans
and so on.

Indirect taxes
Mainly VAT but also a long list including
Bingo duty
Alcohol levies
Customs duty
and so on

Statutory residence tests

There has always been a degree of uncertainty around whether or not some people are resident in the UK for tax purposes. The recent changes to the rules are meant
to improve this situation. Why is this important? Well if you are resident for tax purposes then you are liabel on worldwide income and capital gains.
If you are not resident then foreign income and gains should usually escape the UK tax man.

This is a very brief simplification of the rules

You are non resident for a tax year if

1) You spend less than 16 days in the UK; or
2) You were non-resident in all of the previous 3 tax years and this year you spend less than 46 days in the UK; or
3) You are working full time abroad.

If none of the three points above apply then you will be resident in the UK if either

1) You spend 183 days or more in the UK; or
2) You have your only or main home in the UK; or
3) You work full time in the UK.

If none of the above six tests apply then we look at a combination of the number of days spent in the UK along with the strength of your ties to the UK.The more
ties you have then the fewer days you can spend here if you want to escape the UK tax regime for foreign earnings and gains.

Travel expenses & Samadian

The Upper Tier Tribunal has upheld the rulings in the Dr Samadian case.

The main point seems to be that travel between a home base and anywhere which is a regular place of business will now be disallowed under duality of purpose.

This is potentially very significant and claims for business mileage should now be reviewed.

Do you live in Carlisle? Would you like tax advice? Please give me a call.


Private residence relief changes

When houses became harder to sell the government brought in a relief for owners who basically had to buy a new house without selling their old one.

They allowed you 3 years to sell the old house without any reduction in the private residence relief for the capital gain on sale.

From April 2014 this period will be reduced to 18 months.

So if you own 2 or more houses and they are both potentially your residence then you might need to reassess which is your main one and let the tax man know.

Tax advice and bookkeeping in Cumbria? – Give me a call on 075 1391 7997

£2,000 NIC relief

The £2000 employers NIC relief will kick in from April

Basically it is

  • Available to all sizes of business, with certain exceptions.
  • Claimed via the payroll software.
  • From 6 April 2014 onwards.
  • This measure was announced in the 2013 Budget

So for instance

  • a single employee a salary of £22,448, or
  • two part-timers on salaries of £15,202, or
  • three part-timers on £12,786, or
  • four part-timers on £11,579 per annum and
  • pay no ER’s NICs at all.

From 2015/16  there will also be exemption for any employee under 21 and earning less than £813 a week.

Do you live and work around Carlisle? Why not give me a call for free a consultation.

Capital gains tax on a granny flat

The recent first tier tribunal decision in the Wagstaff case brings welcome news for anyone who has come to a financial arrangement with an parent or in law in regard to their house.

The old lady sold her house to her daughter and son in law on the condition that she could continue to live there. When the house came to be sold it was accepted that an implied trust had been created and therefore private residence relief was available.

More details here

If you live in Cumbria and have a tax question then please give me a call on 075 1391 7997

FHLs and BPR

Holiday cottages ( or furnished holiday lets ) are a funny creature. For NIC purposes they are not a business but for some really important reliefs they have always been regarded as a business.

One of these reliefs, business property relief, means that traditionally there would be no inheritance tax to pay on a holiday cottage. With IHT rates as high as 40% this was a valuable concession.

However the recent Pawson case looks as if all this has been overturned.

Basically the executors of the estate will need to show that the business activities have been much more than maintenance and taking bookings. You have to look to what a hotel or B&B would provide as an idea. So these might include

1. Cooking and provision of meals ( think a courtyard of cottages and maybe a tea room attached)

2. Activities on site such as organised trips.

3.On site services such as massages or baby sitting.

To me it looks like this level of service would be tricky for single cottages and ones which are remote or isolated.

If you have a number of houses close to many attractions and you or a manager live on site or nearby then there is a chance for you but otherwise?


What is entrepreneurs relief?

When you come to sell your business there will hopefully be a capital gain to pay. In most cases this will be charged to tax at 28%. However Entrepreneurs relief can offer you the opportunity to only pay 10% capital gains tax. The relief applies to partnership disposals as well as certain land and building sales where they were used in a qualifying business. There is a lot of small print but essentially this is a good relief for business owners.

Registering as self employed

So you have decided that you would like to be self employed as opposed to conducting your business through a company. Well this is what you now need to do.

1. Set up a business bank account.Longer term it is better not to mix up private and business expenses and income. This is better for your accountant and better when dealing with the tax man.You will need to keep the statements for 6 years.

2. You have to notify HMRC within 3 months of starting. If you fail to do this there is a £100 penalty.

3. Contact HMRC to register for national insurance and income tax. They will supply you with a 10 digit unique tax reference number (UTR).

4.Once you have a UTR you can then register to use the online service. As part of this process they will send you an activation code so you can complete the process.

5.If you expect your sales to be in excess of £79000 pa then you have to register for VAT.They will issue you with a VAT registration number and as for income tax you can administer this online.

6.You need to decide to what date you would like to complete your trading year. We recommend 31st March each year to coincide with the tax year. Technically it is the 5th April but the 5 day difference is ignored by HMRC in most cases.

7.You should budget for any income tax payable. This is due on 31st January in the tax year and 31st July after the tax year.These two payments are always estimates.The balance is paid 31st January the year after the tax year.This means each January you have two payments to budget for. Half of what you think you will need to pay this tax year plus any under/overpayment for the previous year.

What expenses can you claim against tax

This is one of the most frequently asked questions…what expenses to claim to offset against sales and to reduce the tax bill.

Well if you are an employee the answer is somewhat limited to wholly, exclusively and necessarily incurred costs. But if you are a sole trader then the definition is more widely drawn as just wholly and exclusively.

Staff costs. The costs associated with your employees should be fully recoverable. The pay, benefits, pensions and their travel on work related business.

Rent and rates. All the premises costs should be allowable unless there is a private use element.If you use your home as an office then the Inland Revenue allow a nominal amount. You can claim more but you will need to justify the claim.

Telephone costs. Mobiles and landlines.Should be fully allowable but there are cases where an estimate of private use might be excluded.

Repairs and renewals.Fully allowable but you need to be able to distinguish between a repair and a capital addition.

Professional fees. Usually allowed eg accountants fees. Some costs might be capital and you will only get relief when the asset is sold and then as an increase in the base cost for capital gains tax.Examples being legal fees and any expense to protect your right to the asset.

Printing, postage and stationery. As long as incurred for the business these are allowable.

Entertaining...these are not allowable.

Travel costs – generally are allowed but exceptions cover instances where excess luxury or personal involvement are in play.

Motor costs. Largely allowable but care is needed to identify any capital costs such as depreciation.

Training costs are generally always allowed but there are restrictions for sole traders training for new skills.

You are welcome to contact us for free advice. Wherever you are, Carlisle, Brampton, Penrith or indeed anywhere in Cumbria do call us for advice on tax and bookkeeping.

RTI relaxation for small business

The introduction of RTI must be one of the most fundamental changes in payroll for small businesses in many a year. Fortunately HMRC seem to be starting to recognise some of the issues and they have announced the following. Taken from here.

HMRC has extended the temporary relaxation of real time information (RTI) reporting rules for small businesses for a further six months to April 2014.

The relaxation applies to businesses with less than 50 employees and was originally set to run until October 2013.

According to HMRC:

These transitional arrangements only apply to small employers who pay their staff manually, for example, weekly or fortnightly and then take their records to their payroll provider monthly to process the payroll for the month. These arrangements do not apply to small employers who can run their payrolls weekly or fortnightly and can report payroll information at the time of payment.

Writing to the tax man

HMRC have published guidance on headings which should be used when writing to them. This will help speed up replies…all to the good.

Their advice is here

and the details are here

Primary level headings Secondary level headings
  • Agent no longer acting
  • Allowances and reliefs
  • Calculation queries
  • Cessation of a source of income
  • Complaints
  • Deceased case/bereavement
  • Employer correspondence
  • Employer penalty appeal
  • ESCA19 request or employer error
  • Information requests
  • Insolvency/bankruptcy
  • Loss claims
  • New source of income
  • PAYE coding query/amendment
  • Progress chasing correspondence/repayments
  • Self Assessment appeal
  • Self Assessment/PAYE repayment claim
  • Self Assessment set up or close record
  • Self Assessment statement query
  • Self Assessment tax return amendment
  • Self Assessment tax return request
  • Appeals – penalty appeals
  • Appeals – surcharge appeals
  • Capital allowances
  • Capital gains (inc Principal Private Residence Elections and quoted shares)
  • Chargeable events
  • Discovery assessments
  • Double Taxation Relief
  • Film losses
  • Foreign income (Foreign Tax Credit)
  • Investment club
  • Trading losses
  • Overpayment relief under Schedule 1AB
  • S33 trading losses
  • Scholarships /grants
  • Share schemes
  • Special assessments
  • Venture Capital Trust/Enterprise Investment Scheme


Anti-avoidance GAAR

The UK is, at last, getting a legal framework for anti avoidance….a general anti avoidance rule or GAAR.

The new rules are contained in the Finance Bill 2013 and should receive Royal Assent in July this year.

Essentially this combats schemes which aim to save tax in away which was not anticipated by parliament when the relevant tax law was written AND also where the course of action cannot be argued as reasonable.

Schemes caught by this net will be assessed by three members chosen from an advisory panel.

Not really something most small Cumbrian businessmen will need to worry about. But in an age where the big tax avoiders seem to take all the headlines maybe a step in the right direction.

References: Taxline June 2013