Now that the dust has settled on Rachel Reeves’ first budget, I’ve been rummaging through my postbag for some interesting tax related questions, asked by clients and readers of the Blog, which will hopefully be of interest to you. Today’s selection:
- Private use of work vans
- How do I open a business bank account?
- Can I claim for my psychiatrist?
- Advice from your ‘mate down the pub’, could be a pigs ear!
- Can you settle an argument on the Beatles?
1.Private use of work vans
I’m a self-employed electrician and own two vehicles, an Audi A3, which is 90% private, with its business use being to visiting customers to give estimates and a Ford Transit Van, which has very small private usage. I don’t claim for my Audi, but can I claim for all the Transit vans costs through my business or do I have to make adjustments because of the benefit in kind rules?
Answer
The BIK rules for private use of vans only kick in if there is “more than insignificant” private use. Examples given by HMRC include: – taking household rubbish to the tip a few times a year, regularly making a slight detour to pick up a newspaper, visiting the dentist on the way home. It’s up to you to assess how significant the private use is and be prepared to justify that if asked. Also, any use of your Audi is eligible for a mileage claim at 45p per mile, but you must keep a log of any such journeys.
2. How do I open a business bank account?
I recently formed a limited company and will be actively trading early in the new year. I’m trying to get everything set up properly before I start, but I’m struggling to open a bank account in the company’s name and have been turned down by two high street banks because I don’t have proof of trade. Any thoughts on who to approach that doesn’t need see the chicken before the egg?
Answer
I’ve found that the online “challenger” banks to be far more flexible for start-ups; for example, I recently assisted a limited company client set up a new account with Tide, who had no issues with lack of trading and who opened the account within a matter of days.
3. Can I claim for my psychiatrist?
I’m an actor and last year joined the permanent cast of a ‘Soap’ on TV. It’s not a starring role but I am on screen in most episodes and am now increasingly being recognised in my private life which is causing me real stress and I’m struggling to handle it. I now visit a counsellor, who has helped a great deal, but can I claim my counselling fees as being tax deductible, as I consider them to be work related?
Answer
There was a High Court case on this very subject several years ago Norman v Golder, to settle what has been a recurring question in the creative industries and the judgment went against this type of claim. Sorry to be the bearer of bad news.
4. Advice from your ‘mate down the pub’, could be a pigs ear!
I own and run a village general stores and sell a lot of sun-dried pigs ears, mainly as healthy dog chews, I’ve been told by a friend in my local that I shouldn’t be charging VAT on the sale of these items as they’re classed as food. Is he right?
Answer
Your mate down the pub is partially correct, but it very much depends on how the pigs’ ears are held out for sale. if they’ve not undergone a process, such as the addition of colouring or flavouring and they’re held out for sale as simply dried pigs’ ears, they’re zero rated as food. If, however, they have been coloured/flavoured or they are held out for sale as dog chews, they are classes as pet food and standard-rated.
5. Can you settle an argument on the Beatles?
If you have the time, I’d appreciate you settling an argument concerning the Beatles song ‘Taxman’. My friend is sure that the song is about the introduction of VAT in the 1972 Finance Act, but I believe the song was about the then Labour government, taxing the ‘Fab Four’ on their earnings when touring America, including sales of records. Which of us is correct?
Answer
Neither of you are 100% correct, but you have arguably won the argument as this 1966 song is about income tax. if you listen to the lyrics, especially the line “Let me tell you how it will be There’s one for you, nineteen for me ‘Cause I’m the taxman”, it’s clear that this protest song was about the progressive tax rates imposed by the Labour government, which saw the Beatles paying a 95% supertax on a large part of their earnings, in other words the taxman was taking nineteen out of every £20 earned by the ‘Fab Four’.
