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September Question and Answer Corner

Newsletter issue - September 07.

Q. One of my employees has died suddenly and I want to make a lump-sum payment to his family. Will this be tax deductible for my company and will the family be taxed on the payment?

A. Any lump sum payment made in connection with the death of a serving employee is tax free for the recipient, as long as that payment does not constitute an un-approved retirement benefit scheme. The payment should also be tax deductible for your company as it is made in connection with the termination of the employment of one of your staff, (unfortunately in this case by death).

Q. My bank paid me some compensation due to their mismanagement of my account. Is it taxable?

A. It depends whether the compensation relates to your business or private bank account. A payment in connection with your private account is a personal matter and is not taxable. If the payment was made in connection with your business bank account, and as a result of a claim being made to the bank, then it is a trading receipt and is taxable as part of your business. If the compensation payment was made without being asked for, (very unlikely from a bank) it may not be a trade receipt, and thus not be taxable unless was paid to replace an asset that was lost or destroyed.

Q. I'm on the flat rate VAT scheme for small businesses and have recently paid over £2,000 for membership of trade organisation. Can I claim the VAT back on that fee as a capital asset?

A. Under the flat rate VAT scheme you are not permitted to reclaim VAT paid on any purchase, unless it is a capital asset costing £2,000 or more. The capital asset acquired must be a physical good, not a service. So the payment to join the trade organisation does not qualify as a capital asset for the flat rate VAT scheme, and you can't reclaim the VAT.

 

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What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.