Q: We currently supply some of our employees with bicycles to get to our premises. Can you advise on the tax implications for us and the employees concerned. Also, some employees use the bicycles to deliver packages for business purposes, so does this affect the position?

Jackie, Worcester.

A: Generally, company owned assets which are provided for the use of employees attract a benefit in kind based on 20% of the market value. However, bicycles which are supplied to employees for home to work travel do not attract a benefit in kind. One condition for this is that the bicycles or equipment are made available generally to all employees of the employer. This does not mean that every employee has to be provided with a bicycle or equipment, just that the offer of bicycles or equipment is open to all employees if they wish to take it up.

If your employees are using bicycles for business deliveries, it may be more tax efficient for them to own these personally. Employees who use their own pedal cycle for business mileage can claim a tax free expense of 20p per mile from the employer.

Please be aware that if you transfer the bicycle to the employee for this purpose, the employee will be assessed on the higher of the market value at the time it was first made available to employee for private use, or the market value at the time of the transfer. So if you give an employee who pays tax at basic rate, a bicycle worth £500, then he will incur a tax charge of £100. Therefore, you should always consult your employee before implementing such a change.

We provide tax accountancy services in Worcester and throughout the UK.  http://www.taxassist.co.uk

Given that your net profit and subsequent tax liability for the 2009/10 tax year is likely to be significantly less than the previous tax year (2008/09) on which the payments on account are based, you can make a claim to reduce them. The amount that you reduce these to should reflect your estimation of the tax liability for the 2009/10 tax year, which is due for payment on the 31st January 2011. Either you or your accountant can make this claim using a form SA303 available from HMRC.

However, be warned if it is later found that you have overestimated the fall in your income, and consequently paid too little, you will be liable to pay interest on the difference between the amounts paid as payments on account and the amount actually due. Equally, if you have overestimated, you will be due a tax refund for the year and receive an interest supplement.

We provide tax accountancy services in Ipswich and throughout the UK.  http://www.taxassist.co.uk

Q: I want to start a new business which benefits the schools in my local community, and recently read an article regarding Community Interest Companies. Can you provide further information?

Andrew, Waltham Abbey.

A: Community Interest Companies (CIC’s) are a new type of company set up for the benefit of the community, not to make profit and therefore recognised as Social Enterprises. They’re regulated by the Community Interest Company Regulations 2005 and are different to most limited companies which are set up to make a profit for the shareholders.

Despite being particularly attractive to those who wish to establish their business as a benefit to the community there may be a significant tax disadvantage in operating a CIC. CIC’s cannot pay dividends in the same way as a normal limited company because the director’s salary and shareholder dividends are restricted by legislation thus ensuring the assets and profits are retained for community purposes.

Also, CICs do not have any special tax status, and are generally in the same position as any other organisation in obtaining any tax concessions and are required to submit tax returns and make accounts available for public record.

In summary Community Interest Companies are a good concept but those setting them up should be aware of the tax consequences and ensure seek advice from a local TaxAssist Accountant before proceeding.

We provide tax accountancy services in Waltham Abbey and throughout the UK.  http://www.taxassist.co.uk

A: Unfortunately not, you can only claim back the VAT on goods that you have acquired in the 3 years prior to registration which are still held in stock (or used to make other goods which are still held in stock) and originally acquired for the business purposes. This also includes VAT incurred on fixed assets you still use in your business.

You can also recover the vat incurred on services, which have been supplied within 6 months prior to becoming registered, assuming they were also supplied for the purpose of the business. Therefore, any VAT suffered on goods which have been sold on to customers cannot be re-claimed.

To reclaim VAT on these items you need to include the claim on your first VAT return. You should also carry out a careful stock check and record the quantities of goods and the dates when you obtained them. This will form the basis of the records you need to keep to validate your claim.

We provide tax accountancy services in Hornchurch and throughout the UK.  http://www.taxassist.co.uk

Q: I’m coming to the end of my third year of business as a soletrader, and understand I can reduce my tax liability by investing in a new van and some equipment before my accounting year end. Can you explain further?

Paul, Loughborough

A: By purchasing equipment for your business before the end of your accounting period, you can receive tax relief in the form of capital allowances. The amount of tax relief you receive depends on whether you are a higher rate tax payer (currently 40%), or a basic rate taxpayer (20%). You will also receive National Insurance Class 4 relief of either 1% or 8% depending on the level of profits for the year.

Under current rules, the majority of small businesses are able to claim a 100% Annual Investment Allowance (AIA) on the first £100,000 of expenditure on most types of plant and machinery (except cars) in the 2010/11 tax year. Any expenditure exceeding this level will receive 20% writing down allowance (WDA).

Vans qualify for the AIA allowance, and therefore assuming you do not have any private use of these items, the full cost of the new van and other items will be offset against your self employed profits in the year.

You should also be aware the new government recently proposed a reduction in capital allowances rates. From April 2012, the maximum amount of AIA will reduce to £25,000, and the standard writing down allowance will also be reduced to 18%.

We provide tax accountancy services in Loughborough and throughout the UK.  http://www.taxassist.co.uk

A: Unfortunately donations of goods and other items to a chosen charity can not receive tax relief under Gift Aid as the scheme only applies to gifts of money. However, your charity can act as an agent for you by selling goods on your behalf in the hope that you then donate the proceeds from the sales to the Charity.

If the donation of the eventual sale proceeds is made in this way then you will be able to include a deduction for gift aid in your tax return, and higher rate taxpayers will receive a further 20% tax relief either in the tax year you make the donation, or the year before if you choose to relate it back.

Initially, we recommend you speak to your local Charity shop to see if they will actually sell the goods on your behalf, as they must remain your property until they are sold. Also you reserve the right to keep all or part of the proceeds of the sale, so the charity must keep a record of the items they sell on your behalf and if they ask you to complete a Gift Aid declaration before the sale (in anticipation of the proceeds being gifted to them). The wording of that declaration must not force you to make a donation as you must retain a choice of whether or not to gift the proceeds.

We provide tax accountancy services in Lincoln and throughout the UK.  http://www.taxassist.co.uk

A: Regrettably you friend is wrong.

On any goods or items from stock that you remove for your own use you will have to account to the business for the full selling price and assuming that you are VAT registered, the VAT applicable to the sale.

We provide tax accountancy services in Torquay and throughout the UK.  http://www.taxassist.co.uk

A: To qualify for Statutory Maternity Pay (SMP) and maternity leave then you must have been employed by the same employer continuously for at least 26 weeks into the 15th week before the week your baby is due (the qualifying week).

You also must have earned at least £97 per week on average for the eight weeks prior to the fifteenth week before the baby is due.

Therefore, provided that you have worked concurrently for each employer for at least twenty six weeks prior to the qualifying date of the 15th week before the baby is due then you will be able to claim from each employer.

The amount you receive depends on the amount you earn from each job. The first six weeks will be paid at 90% of your average earnings for the eight weeks prior to confinement. The remaining 33 weeks will be paid at 90% of your average earnings as above or at the rate of £124.88 per week, whichever is the lower.

We provide tax accountancy services in Norwich and throughout the UK.  http://www.taxassist.co.uk

Bill, Darlington

A: If you are just selling some unwanted items that have been lying around in the attic and your home, the answer is probably no, as in order to pay tax on the goods you sell, you either have to be trading or make a capital gain.

You are likely to be treated as trading where the HMRC consider you to be purchasing or making goods for resale with the intention of making a profit, or sell goods for others and receive a commission.

If you only sell occasional, unwanted personal items through internet auctions, car boot sales and classified advertisements then it is unlikely they will view you as self-employed. This is due to the fact that in most cases the second hand value and amount you receive rarely exceeds the original price you paid for item, and as tax is only chargeable on the profits you make, no tax will be chargeable.

Capital Gains Tax is only charged on gains you make and if you sell an item for less than you purchased it for you will not make a gain. It is the gain that is taxed, not the amount you receive. Therefore, you will only have to pay tax if the items you sell have increased in value during the time you have owned them, and as they are likely to be personal effects or goods (known as ‘chattels’) you are selling, which are individually worth less than £6,000 when you dispose of them, it is very unlikely you will have made a gain.

If you are concerned that your situation may be considered to be trading you should discuss this with your local TaxAssist accountant, as there is a late registration penalty if you do not register within 3 months of starting to trade.

We provide tax accountancy services in Darlington and throughout the UK. http://www.taxassist.co.uk

Income tax allowances and rates

1. Personal allowance for the under 65’s increasing by £1,000 to £7,475 for 2011/12 , but with the basic rate band reduced so that higher rate taxpayers do not benefit (they of course gradually lose their personal allowance if annual taxable income exceeds £100,000).

2. Higher rate band level frozen to 2013/14.

ISAs

From 6 April 2011 the annual Individual Savings Account  limit (currently £10,200, of which a half can be in cash) will increase in line with the RPI, and rounded to a convenient multiple of 120 for the ease of monthly savers.

Non-domiciled individuals

The tax treatment is to be reviewed. This will consider whether changes can be made to the current rules “to ensure that non-domiciled individuals make a fair contribution to reducing the deficit in return for greater certainty and stability for those bringing skills and investment to the UK”.

Deduction of tax at source by individuals and non-corporate entities

Currently the requirement is to deliver an account to HMRC for income tax deducted at source from interest and royalty payments they make, and HMRC can then assess the amount of tax due to them. There is no set form for submitting an account and the new Finance Bill will allow HMRC to issue regulations specifying how and when an individual or other non-corporate should account for, and pay, income tax deducted at source.

PAYE System

This is being reviewed, to see how the system could be improved so as to reduce costs and make it easier to administer for both employers and HMRC. Initially there will be consultation with employers and payroll providers on mechanisms which could support more frequent or real time PAYE data.