Selling on eBay

Q: I own a shoe shop but due to cashflow problems, I have been selling some of my personal belongings and old stock on Ebay recently. Should I include my income from Ebay on my tax return?

Joel, Pinner.

A: All your trading sales (whether you sold through the internet, at car boot sales, through the small advertisements or any other means) should be included in your total sales figure. If you are VAT registered, you should also charge VAT on sales to your customers where applicable. Remember to include any sales to friends and family and don’t forget to include cash sales too.

As for the sales of your personal belongings, it is unlikely you will need to declare the proceeds on your tax return, unless you can answer yes to at least one of these points:

• buy goods to then sell online
• sells items that you have made, and you made them with a view to profit
• sell goods for others, on commission
• sell a service and get paid for it

And a word of warning- HMRC has a tax evasion hot line for people to ‘tip-off’ plus it uses computer programmes to scan internet sites like Ebay and look for people making multiple transactions.

If you are unsure or would like to discuss this further, please feel free to contact your local TaxAssist Accountant.

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

Can I Claim the Cost of Work Clothing

Can I Claim the Cost of Work ClothingQ: I am self employed and while I do most of my work at my office, there are frequent occasions when it is necessary for me to visit clients in their workplaces in appropriate business dress. I need to buy a couple of new suits for such meetings – is this considered an allowable expense for tax purposes?

Josh, Colne.

A: This is one of a variety of expenses which the Courts have held to have an “intrinsic duality of purpose” – which means they are not deductible for tax purposes.

The suits are actually classed as “ordinary clothing worn by a trader during the course of their trade” and are not deductible expenditure for tax purposes. This is the case regardless of whether particular standards of dress are required, for example, to comply with the rules of a professional organisation, or simply for the trader to keep up appearances on meeting clients.. Conversely, the cost of clothing that is not part of an ‘everyday' wardrobe, such as protective clothing and uniforms (especially where they bear your business logo) is deductible against your business income for tax purposes.
If you think you are not claiming enough business expenses such as clothing, please feel free to contact your local TaxAssist Accountant for some advice.

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

Claiming Expenses for Working at Home

Claiming Expenses for Working at HomeQ: I’ve been talking to my mates down the pub and I’ve found out that some of them claim lots more Use of Home in their accounts than I do- yet we do similar things. Why is that?

Spencer, Glasgow

A: There are two main ways of calculating use of home. If there is only minor use, for example writing up the business records at home, you may put through a reasonable estimate with little risk of dispute by HMRC. Needless to say, it should be consistent with your household utility bills though.

If you were based from home, then you could apportion the household bills such as gas, electric, water etc by dividing the total costs over the number of rooms, and multiplying that figure by the number of rooms used for business purposes.

In order to satisfy tax law, when part of the house is being used for the business then that must be the sole use for that part at that time. Thus if the part of the home used for business purposes is simultaneously used for some other non-business purposes, then no deduction is available. You should also avoid making one of your rooms solely for business purposes and out-of-bounds to the rest of your family though. Doing this could jeopardise an element of your Only or Main Residence Relief for Capital Gains Purposes, which normally sees any gain on your home reduced to nil.

As you can see from the above, if you don't work from home regularly, you may be using the first method. If you are working regularly from home, then it would be advantageous to use the second, i.e. apportionment method.
In practical terms, you will need to be seen to be applying common sense to your claim, for example, if you only write up your books at home, there would be a far smaller charge than if you were working each day from home and treating it like an office.

Although there is no fixed proportion of costs for particular trades, there is an expectation of what use of home will amount to. Any enquiries from HMRC will be more likely when the amount of use of home claimed is significant and inconsistent with the nature of the trade.

Each case will be different, so if you would like advice in this area, please feel free to contact your local TaxAssist Accountant.

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

Small Business Rate Relief

Q: A friend told me that there was an announcement in the last Budget that small business rate relief was going to be extended and this may affect my hairdressing salon.  How do I apply for the new rates?

Nicola, Uxbridge

A: That is correct, it was announced earlier this year that Small Business Rate Relief (SBRR) would be temporarily extended to help small businesses. The relief available will depend on whether the premises are in England, Northern Ireland, Scotland or Wales.

The qualifying requirements have remained unchanged and most businesses in England will qualify if they occupy only one property and the rateable value is less than £18,000 (£25,500 for London).  Rates are charged at a reduced amount depending on the value of the property (there are three different reduced rate bands) and then further relief is given at 50% for properties with a value of less than £6,000 and at 25% with a value of less than £12,000.

The new increased rates come into effect on 1 October this year and will apply until 30 September 2011.  For premises in England the enhanced relief will mean that businesses operating from qualifying premises with a rateable value of up to £6,000 will get 100% relief.  Where the rateable value is between £6,001 and £12,000 the rate of the enhanced relief is tapered from 100% to zero.  Your local authority should issue a revised bill to you showing the increased relief now due.

In previous years, SBRR had to applied for at the start of each valuation period, but that process has now ceased and if SBRR has been claimed in the previous year, it will automatically be applied for future years.

There are other reliefs available for community amateur sports clubs of up to 80% and various non-profit making organisations could qualify for up to 100% relief.  It is also worth noting that there are special reliefs available for certain rural businesses and hardship relief may be available for certain businesses who have dificulty in paying.

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

Capital Allowances on a new Van

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