With just over three weeks to go before we hear how the new Chancellor, Rachel Reeves, plans to extract even more tax from thee and me, there is precious little tax news available, just a great deal of speculation. So, I thought a selection of tax related questions, asked by clients and readers of the Blog, will hopefully be of interest to you. Today’s selection:
- Where’s my tax refund?
- How do I avoid losing my VAT claim?
- A waggy dog tale
- Advice from your ‘mate down the pub’, can sometimes be correct
- Can I claim for as a business expense?
Where’s my tax refund?
In May 2024, I submitted my self-assessment tax return and it showed a tax refund due of £1,176. When I submitted my tax return, I entered my bank details, as requested by HMRC and then sat back and waited and waited! Eventually, after waiting 4 weeks longer than HMRC’s website advised for a refund to be issued, I still hadn’t received it. I’ve tried to contact them, firstly via my on-line tax account on their tax portal, then by phone, multiple times and still no refund. I really need the money, so is there anything else I can do?
Answer
HMRC has a woeful record on issuing refunds within their advertised 6 weeks. The only guaranteed route is to complain by letter, demand interest and threaten to escalate the case to your MP if they don’t respond within 30 days. You must send in the letter by Special Delivery, as they have to sign for it and keep your proof of posting receipt. This way always works, though the process can and probably will take 6 to 12 weeks.
How do I avoid losing my VAT claim?
I run a small wine merchants and we recently ran a client event, and have been invoiced for the cost of lunch, including VAT. A wine importer who wants us to promote his wines will reimburse us, but we are paying the invoice, and then invoicing him for the same amount. As it’s client entertainment, I shouldn’t claim VAT on the cost, but will have to account for VAT on the “sale” to the importer, in which case we will be out of pocket by the VAT amount, what should I do?
Answer
In essence, you are simply being reimbursed by a third party (the wine importer) for providing a service on his behalf. As the purchase invoice will be an identical amount to the sales invoice the two will contra themselves in you accounts; but make sure that you keep all relevant paperwork, just in case!
A waggy dog tale
I have a mobile dog grooming business in partnership with my husband and have just purchased a WA52 DOG number plate to go on our grooming van. The number plate is in cursive script and at a glance reads as ‘WAG DOG’, is this a legitimate business expense that can be claimed for?
Answer
The waggy dog nature of the plate number would clearly indicate a business advertising purpose for the plate and in my opinion can be claimed for. But rather than being an expense, it should be treated as an asset and written off via capital allowances. Also, there’s the possibility of CGT on any profit you make if you sell it.
Advice from your ‘mate down the pub’, can sometimes be correct
I employ twenty people, and their basic salary is for 35 hours per week; however, they all regularly work overtime. When one of them takes a week’s holiday, he just receives his basic 35 hours, but chatting to a friend over a beer, have been told by him that I have almost certainly got it wrong, and their holiday pay should include an additional amount related to their overtime earnings, is he right?
Answer
Yes, your mate is correct, and you have got it wrong. The rules clearly state: “The weekly rate of holiday pay is the average of relevant earnings (including, but not exclusively, salary and overtime) paid during the 52 weeks preceding the holiday.” Time to eat humble pie my friend!
Is a retirement party tax deductible?
I’m the sole director of a small company employing on average 10 people. Recently, one of my staff retired and I put £250 to put behind the bar for a retirement party, which was attended by all my employees and their wives. My question is, will HMRC view the £250 as a taxable benefit received by the retiree (to be declared via PSA) or would you consider this to be various trivial benefits received by the employees who attended the party and therefore no tax to be declared and paid?
Answer
Worry not, your retiring employee will not have to pay any tax. Divide the £250 by the number of employees attending. HMRC’s website gives a trivial benefits example of bottles of wine as being allowable…. and retirement is not considered to be a regular event. It’s considered as a trivial benefit if it works out at less than £50 per head on average. Have a look at Example A “the birthday dinner” in HMRC’s “Income Tax: exemption for trivial benefits in kind”. Go to HMRC’s https://www.gov.uk/government/publications/tax-exemption-for-trivial-ben…)
