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June Question and Answer Corner

Newsletter issue - June 09.

Q. My business requires me to spend up to 100 days a year away from home speaking at conferences. I always travel first class, to allow me to prepare notes on the train, and stay in four-star hotels. The Tax Inspector has said my expenses are excessive and I should only get a tax deduction for the cost of second class travel and two-star hotels. Is he correct?

A. The Tax Inspector is not correct. His own Employment Income Manual at paragraph EIM 31835 says: "The tests that apply to travel expense relate to the nature of the expense and not to the amount." It goes on to say: "You should not refuse a deduction for first class rail travel, if that has been incurred, on the basis that the same journey could have been made more cheaply in standard class". As long as the travel and hotel costs were incurred wholly and exclusive for your business of lecturing the full cost is tax deductible.

Q. I pay income tax at 40%, but my wife and child have no income at all. If I buy fixed income bonds in their names will the interest be effectively tax free, as it will be covered by their personal allowances?

A. When you buy the bonds in the names of your relatives you will be giving them the capital you invest, as they will have complete control of the bonds. There is no limit on the amount you can give to your spouse, although there could be inheritance tax implications. Your wife will be taxed on the interest from her bond, but if this does not exceed her personal allowance of £6,475, there will be no tax to pay. If your child is aged under 18, the interest from his bond will be taxed as part of your income if it exceeds £100 per year.

Q. If I start earning money from a website I have setup in my spare time, will I have to pay tax and national insurance on that income? I am also employed full time on a salary of £25,000 a year.

A. You should register your new web business with the tax office as a self-employed business. We can help you do this if you wish. Your self-employment will not affect your employment, and your employer need not know about your website business. However, you will have to complete a tax return each year to declare all of your income; from your business, employment and any investments. By registering as self-employed you will also be automatically registered to pay class 2 national insurance in respect of your self-employed profits. If these profits are expected to be less than £5,075 for the current year, you should complete form CF10 which is a request for exemption from paying class 2 national insurance.

 

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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.