Tax Partner Pro – Your Q answered April 25
Q
My client, a director of a limited company, works from home. His boiler broke down in January and he paid for the repairs out of the business money. As this is an expense that would be insured regardless of whether he runs a business or not (like for example council tax), I see this as a non deductible expense for corporation tax purposes, but I wanted to check with you in case there are any provisions that would allow for a relief in this case, even a partial one, that I’m not aware of.
A
We can confirm that we would agree with your conclusions. Unless the boiler was wholly and exclusively used for business purposes, it would be a personal expense. If your client gets the company to pay for this, as long as the value is within the director remuneration package the company can receive Corporate Tax relief for the expense. It will however be a benefit in kind that would need to be reported on a P11D.
Alternatively, your client can repay the company for the expense, if they wish to avoid the benefit in kind.
To be within the director remuneration package, their total salary, benefits and employer pension contributions needs to be of a reasonable value for the services they provide the company. If these amounts are excessive, then Corporate Tax relief would be restricted.
Q
We act as the accountants for the estate of a deceased individual. The original solicitors were closed by the regulation authority so the estate management was passed to a new firm. The funds in the estate have been inaccessible for several years whilst a legal investigation was ongoing and have now been released.
In addition to the estates usual funds, the Solicitors Regulation Authority have also approved an estate claim payment from their compensation fund as a “payment in lieu of interest” of £17,105.20. I assume this would be taxable in the estate as I believe interest compensation from other regulators such as the financial ombudsman is taxable on an individual and I presume the same applies in this situation.
A
The payment in lieu of interest would be taxable on the estate, and it would be treated the same as ‘savings income’. This is outlined in s.18 ITA 2007:
“18(3) Income is within this subsection if it is–
(a) income chargeable under Chapter 2 of Part 4 (interest),”
“18(4) Income is within this subsection if–
(a) it is chargeable under Chapter 9 of Part 4 (gains from contracts for life insurance etc), and
(b) an individual is, or personal representatives are, liable for income tax on it (under Section 465 of the Section 465 of the Income Tax (Trading and Other Income) Act 2005 or Section 466 of that Act).”
The payment is likely to remain within the definition of interest for this purpose, as it is compensation for retained funds, see SAIM2030:
Interest is not defined in the Taxes Acts. It is a concept of common and contract law. Halsbury’s Laws of England defines it as follows.
“Interest is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another. Interest accrues from day to day even if payable only at intervals, and is, therefore, apportionable in respect of time between persons entitled in succession to the principal.”
Q
I have a client query:
“My daughter has a YouTube channel, and it became eligible for monetisation from December – she has earned approx. £1300 in 3 months but the payments are in my name because of her age, so I will need to declare them on my self assessment and pay tax accordingly!”
Is this correct, i.e. as the beneficial owner or nominee is my client if that’s how she has elected presumably with YouTube, or can her daughter be taxed on the income in her own right? Obviously then covered by her own allowances. Not sure of the exact age of her daughter.
A
“YouTube allows children aged 13 and over to have their own channel, but under 18s cannot have an AdSense account through which they can monetize that channel. They need to link their channel to an approved AdSense account held by an adult to receive payments.
Providing the channel is genuinely that of the daughter and mum is purely receiving the income as nominee to satisfy YouTube’s rules, then the income would be taxed on the daughter rather than on the mum.
Ideally that money should be kept separate from mum’s own money, by transferring it into a separate bank account on receipt for example, to protect against HMRC challenge that it is being earned by – and should therefore be taxed on – mum.”
The post Tax Partner Pro – Your Q answered April 25 appeared first on ETC Tax.
law