Month: September 2014

How do you tell HMRC a company is dormant or active?

relax

Dormant is a term that HMRC and Companies House use for a company or organisation that is not active, trading or carrying on business activity. But HMRC and Companies House use the term dormant in slightly different ways.

For Corporation Tax purposes, HMRC views a dormant company as a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax.

A dormant company can be, for example:

  • a new company that’s not yet trading
  • an ‘off-the-shelf’ or ‘shell’ company held by a company formation agent intending to sell it on
  • a company that will never be trading because it has been formed to own an asset such as land or intellectual property
  • an existing company that has been – but is not currently – trading
  • a company that’s no longer trading and destined to be removed from the Companies Register

Generally your company or organisation is considered to be active for Corporation Tax purposes when it is, for example:

  • carrying on a business activity such as a trade or professional activity
  • buying and selling goods with a view to making a profit or surplus
  • providing services
  • earning interest
  • managing investments
  • receiving any other income

This definition of being active for Corporation Tax purposes is not necessarily the same as that used by HMRC in relation to other tax areas such as VAT, or by other government agencies such as Companies House.

If your limited company has been dormant but is now active, you must tell HMRC within three months of starting your tax accounting period. The best way to do this is to use HMRC’s online registration service.

HMRC have further details on this link

To contact HMRC you will need your Company UTR number and the 3 digit tax office number, then you can use this link to find out contact details for you Corporation Tax Office

When you call, Option 3 is for Dormant Companies and Option 4 is for Active Companies.

Then you will need to write to HMRC to advise them of the change in activity status.

Companies House still require Annual Returns and Annual Accounts even if the company is dormant, but these are obviously easy as there are no changes from the previous year.

steve@bicknells.net

 

Can you claim a tax allowance for clothing?

You need to follow the code

 

Employees may be able to get tax relief if they – and not their employer – spend money on any tools or specialist clothing they need to be able to do your job. Employees can go back several years to get the relief – the time you’ve got depends on whether you’ve previously sent in a Self Assessment tax return.

As a general rule an employee can’t get tax relief for the cost of clothing they wear to work – but there are some exceptions. For example, if you work in a sector like the building trade or the metal working industry you’ll have to wear protective clothing like:

  • overalls
  • gloves
  • boots
  • helmets

If you must pay for the cost of repairing, cleaning or replacing this type of specialist clothing yourself and your employer doesn’t reimburse you, then you are entitled to tax relief. However, you cannot claim for the initial cost of buying this clothing.

EIM32712 sets out some flat rate expenses that can be claimed and EIM32485 allows £60 per year for laundry.

If you are an employee who wants to claim the laundry allowance you should send HMRC a letter as follows:

Re: Uniform Tax Rebate

I have been employed at……… since….. My job title is ……. and I wear a company uniform.

I am obliged to launder the uniform, which is supplied to me by the company. I therefor wish to claim any payment to cover the laundry costs.

The uniform provided is not suitable to be worn outside of the work environment due to having the company logo on it.

I would like to receive the rebate in the form of a cheque….

Self Employed workers have tried to claim for clothes but whilst HMRC have allowed claims for ‘Uniforms’ and ‘Costumes’ they have rejected claims for everyday clothes.

BIM37910 explains to HMRC Inspectors…

You should disallow expenditure on ordinary clothing worn by a trader during the course of their trade. This remains so even where particular standards of dress are required by, for example, the rules of a professional body.

The case of Mallalieu v Drummond [1983] 57 TC 330 (which is discussed in detail below) established that no deduction is available from trading profits for the costs of clothing which forms part of an ‘everyday’ wardrobe. This remains so even where the taxpayer can show that they only wear such clothing in the course of their profession. It is irrelevant that the person chooses not to wear the clothing in question on non-business occasions, the only question is whether the clothing might suitably be worn as part of a hypothetical person’s ‘everyday’ wardrobe.

Most professionals have to keep up appearances but their clothing costs are not allowable (even where they amount to a quasi uniform as in Mallalieu v Drummond).

The cost of clothing that is not part of an ‘everyday’ wardrobe (for example a nurse’s uniform or evening dress (‘tails’) worn by a professional waiter) faces no such bar to deduction.

You should therefore allow a deduction for protective clothing and uniforms.

This was recently tested by Sian Williams who claimed, unsuccessfully…

In her 2004/05 tax return, a newsreader claimed certain deductions from employment income with the BBC for “travel and subsistence costs”, and “other expenses and capital allowances”.

Of these, the following were in dispute:

  • Professional hairdo and colouring £975
  • Professional clothing for studio    £3,231
  • Laundry of professional clothes   £325

She also claimed that as a taxpayer she had the right to be treated fairly, HMRC should offer up details of the amounts which had been agreed as allowable expenses for other news readers and entertainers.

See articles by Ross Martin and the Guardian

 

steve@bicknells.net

What are the differences between employees and contractors?

According to figures released by the Office for National Statistics last week, self-employment is at its highest level since records began almost 40 years ago.

There are currently 4.6 million people self-employed, with the proportion of the total workforce that are making a living for themselves sitting at 15%, compared to 13% in 2008 and less than 10% in 1975.

As highlighted by Everreach and the Daily Mail.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

Workers

steve@bicknells.net