Nunn Hayward - October 2007

Abacus October 2007

Expenses to Claim if Self-Employed and Working from Home

H M Revenue & Customs (HMRC) have recently issued new guidance on the expenses the self-employed can claim whilst working from home.

What has changed?

HMRC have overhauled their guidance on what the self-employed can claim for working from home. It now lists particular types of expenditure, which can be apportioned between private and business use.

Those on the allowable list now include:-

Mortgage interest: This is now allowable in part, when there is not exclusive business use of a part of the home.

Telecommunications: HMRC will now allow a proportion of line rental in addition to the cost of business calls on a single mixed-use line. You should be able to use this approach for broadband costs, and for apportioning all-inclusive packages.

Insurance: Similarly to mortgage interest, part of a household policy can be claimed when there is no separate business policy.

Repairs and maintenance: A proportion can be claimed based on the proportion used for other expenses. This should apply to external repairs and redecoration too.

How do you calculate the proportion to claim?

When a room is not used solely for business purposes, then the proportion of costs that can be claimed is found by dividing time that the room is used for business by total time period.

In an example provided by HMRC, an author works for four hours each morning in her living room, which is then also used by the family for four hours in the evening. The room is 10% of the house, so the first step is to take that percentage of the total costs. In apportioning for time, the example uses four hours’ business in a 24-hour period, so only 4/24 = 1/6 of the costs of the room is claimed.

If it had not been a living room in the example, but instead a study set aside solely for business, then the apportionment could have stopped at the 10% calculation. However, this could have opened up a Capital Gains Tax bill on the appropriate proportion of the gain on the house when it is sold!

In Summary

There are now two steps to maximising your use of home deduction:-

Increase the range of expenses you currently claim; and
Accurately work out the proportion of these expenses you can claim using the new guidance.

One cautionary note - if you are self-employed as well as receiving income from an employment there will be an interaction to take account of.

Should you have any queries regarding this article please contact Steve Cook, Tax Partner on 01753 888211 or steve@nunn-hayward.com

SUGGESTION SCHEMES – TAX FREE PAYMENTS FOR EMPLOYEES

Are you as an Employer wishing to reward your employees for ideas and suggestions that contribute to the success of your business?

Are you aware that certain rewards can be made Tax and National Insurance free in certain circumstances, providing the following conditions are met?

A formal suggestion scheme must be in place
The scheme must be open to all employees on the same terms.
Suggestions must not be made by an employee who could have been expected to make the suggestion in the course of the normal duties of his employment.
The suggestion must not come out of a meeting which has been specifically held for the purpose of proposing suggestions.
The rewards paid do not represent remuneration which would have been paid to the employees in other circumstances
The Company will maintain appropriate records to enable HM Revenue & Customs to confirm that the scheme is operated correctly
That an annual Return will be made each year to HM Revenue & Customs confirming details of any awards made.

HMRC categorise awards into two separate groups:-

Encouragement Awards - These can be made for a suggestion of “intrinsic merit” or showing “special effort” on the part of the employee. A maximum of Ł25 can be awarded per suggestion.

Financial Benefit Awards - These awards must be based on anticipated improvements in efficiency or effectiveness arising from the adoption of the suggestion. These awards must not be more than half of the expected financial benefit during the first year of implementation or (if higher) more than 10% of the expected benefit over a 5 year period. In any case this must not exceed Ł5000 per suggestion and if the suggestion is made by 2 employees the award must be divided between them. Any amounts greater than Ł5000 will be liable to Tax and National Insurance on the excess. Employees can receive more than 1 award, but a report may need to be made to HM Revenue & Customs.

We recommend that any employer wishing to operate this type of scheme should first inform HM Revenue and Customs of their intention to implement a suggestion scheme. Nunn Hayward would, of course, be pleased to assist with any disclosure, or indeed any other aspects of the suggestion scheme.

If you would like further information concerning the above please contact Suzanne Precious at Suzanne@nunn-hayward.com or call 01753 888211.

Stop Press – Tax Rebate Scam

STOP PRESS

Beware Tax Rebate Scam

Some of our clients have been receiving scam e-mail supposedly direct from HM Revenue and Customs giving notification of a tax rebate. The copy we have seen is giving a Ł294 rebate. You are then invited to click on to access the form to complete, which of course asks for your credit card details etc so that the rebate can be made.

If you should receive one of these e-mails please contact Steve Cook, Tax Partner, at steve@nunn-hayward.com or call 01753 888211.

Important Tax Dates

October
19/22		Quarter 2 2007/08 PAYE remittance due.

31		Filing of accounts - Year end 31 March 2007 public companies, year end 31 December 2006 private companies and limited liability partnerships.

Please contact us to discuss the above further

Tel: 01753 888211 Fax: 01753 889669
Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL.

Chartered Accountants, Registered Auditors and Insolvency Practitioners. This publication has been prepared as a guide only to topics of current financial and business interest. It is not intended to be a substitute for professional advice. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by either the authors or Nunn Hayward. All rights reserved.

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