Q: I joined the Flat Rate VAT scheme nearly two years ago. In that time my turnover has risen above the £150,000 limit. Does this mean I have to leave the scheme and if so when?

A: HMRC recently revised the rules concerning the turnover limit. Now provided that your turnover does not exceed £225,000 net of VAT for the 12 months ended on the anniversary of you joining the scheme then you can continue to use the Flat Rate VAT scheme.

You must include in the £225,000 any exempt income such as bank interest, lottery commission or rents. If you have exceeded the limit then you will have to leave the scheme at the end of the VAT quarter which contains the anniversary date of you joining the scheme.

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VAT Accounting Services from TaxAssist Accountants.

Q: I am expecting a baby in August, and will temporarily be ceasing my sole trader business. Am I entitled to any benefits such as maternity pay from the HMRC?

A: To qualify for maternity leave and statutory maternity pay, a woman must be an employee; she must work under a contract of employment. In the same way that individuals who are self-employed are not bound by statutory legislation on, for example, sick leave or holidays, any period of leave to cover the birth of a baby will be a matter of personal decision.

However, as a self employed person you may be able to claim maternity allowance (as opposed to the statutory maternity pay due to employees) to fund the period that you will not be working, assuming you satisfy the criteria outlined in the claim form.

Maternity allowance can be paid for up to 39 weeks. To qualify, you must have been employed or self-employed in at least 26 of the 66 weeks before the week your baby is expected and have average weekly earnings of at least £30.

You should contact your local TaxAssist Accountant or local jobcentre plus office for further details, or alternatively visit the website www.dwp.gov.uk.

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Sole Trader Tax Advice from TaxAssist Accountants

Q: I run a small engineering company, and am looking to purchase some new items of machinery. I understand that assets purchased qualify for Capital Allowances, but can you give me some indication of the likely relief I will obtain on these items?

A: The government made significant revision to the capital allowance regime from April 2008 for both incorporated and unincorporated business. As you haven’t detailed exactly what you are purchasing, I have summarised the current allowances available.

All businesses can claim an Annual Investment Allowance (AIA) for expenditure of up to £50,000. This has replaced the 40% and 50% first-year allowances which were available to small and medium-sized businesses before April 2008. Expenditure on plant and machinery that exceeds this level will receive allowances at 20% per annum. However, as temporary measure in the 2009 budget, the chancellor introduced a temporary 40% first year allowance for expenditure on general plant and machinery.

If the items you are purchasing are categorised as “Integral features” of a building, then they attract a 10% “special rate” of allowances. Assets included here are electrical systems (including lighting systems), cold water systems or water heating systems.

Instead, the items may qualify under a scheme introduced in April 2001 whereby allowances of 100% may be available. Businesses investing in designated energy-saving and water-efficient technologies can reclaim 100% Capital allowances on the expenditure incurred. To see if the items concerned qualify for the increased allowance and for further information on the scheme, visit www.eca.gov.uk and click on “water”. Each year the government adds further items to this list in their annual budget update. Your local TaxAssist Accountant will be able to advise on this further.

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TaxAssist Accountants provide Construction Industry Scheme Tax Advice & Help.

Q: I own a chain of off-licences and have advertised for a new manager for one of these. Part of the package I am offering is that they can live in a flat above the shop as, due to the new licensing laws, we are open for almost 24 hours per day. Are there any tax implications I need to consider for this as I am not going to be charging the new manager any rent?

A: If you allow an employee to live in accommodation supplied by you, they are liable to a benefit in kind on the annual value of that property. They will, however, be exempt from this charge if the accommodation is provided for the customary and better performance of the job, proper performance of the job, or is provided for security reasons. Managers of traditional off-licence shops (those with opening hours broadly equivalent to those of a public house like yours, but not those only open from 9 until 5 or similar) will qualify under the customary and better performance test and will be exempt from a benefit in kind.

Usually, in the scenario you have suggested, the accommodation is supplied for security purposes and (assuming the contract of employment specifies this) it will be job related accommodation.

However, if you are also paying the bills for the gas, water, electricity and other ancillary services such as redecorating on behalf of the manager, he will be assessed on a benefit in kind. This amount chargeable is equal to the lower of: the total of all bills paid or 10% of manager’s earnings in the tax year. Also, if you provide the flat furnished, then there is an additional benefit based on 20% of the market value of the furniture at the beginning of the tax year that the accommodation is first provided.

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Tax Savings Advice from TaxAssist Accountants.

Q: I am a director in a small limited company, and we have a number of employees who have use of company cars and others who receive various expense payments. We are currently completing our end of year forms P11d. Do you have any advice on the type of records we should keep, and what HM Revenue and Customs might target in an investigation?

A: A small company is now more likely than ever to be subject to a full review of their compliance systems and procedures by HM Revenue & Customs. In completing your end of year forms P11d and P11d(b) employers declaration, pay careful attention to anything incurred in the name of an individual director/employee, but paid or reimbursed by the business.

You must include all travel, subsistence, and entertaining expenses in the information you enter on annual forms P11D, even if it is incurred for business purposes (unless you have an official HM Revenue & Customs dispensation). Even if you are registered for VAT, your P11D records have to be VAT inclusive.

You should keep full mileage logs for every vehicle, whether owned privately or by the company as they are likely to challenge all doubtful claims on the business mileage limit. If you were to receive an inspection they would ask for evidence of business mileage. Also ensure you keep separate figures for each car where there is a change during the year, or where more than one vehicle is available to a director/employee. The fuel benefit is an 'all or nothing' benefit, so if the business pays for any private fuel and is not fully reimbursed by the director, the director must accept the corresponding fuel benefit.

We would suggest you retain all records and information relating to payroll benefits for six years, which is the period for which the HM Revenue & Customs has powers to investigate your business accounts.

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TaxAssist Accountants offer Limited Companies Tax Planning Advice.