Hi all, I have a new client who is in rented accommodation. He is a courier and uses his garage (attached to the property and included in the rent of the home) for sorting the parcels and for storage. He only uses the garage for this business purpose and not for personal use. The bookkeeper he used previously seems to have allowed a fixed amount of £20 per week. This doesn't seem right to me but I wonder what others would use as a calculation in this situation?
He also included a figure for clothing for the last two years although there appear to be no receipts for this, the client tells me he was advised he was entitled to include an amount. He also appears to have included the entire cost of the BT bill for the home and the client's mobile phone bill which I would not personally have done. The client also states that 90% of his mileage is for business purposes, he works six days a week and rarely uses his vehicle outside work, he doesn't however record business miles daily. The previous chap just took his annual mileage and claimed 90% of that as business miles.
The only reason the client has now come to me is that the previous bookkeeper retired. The client was happy with the work he did for him and keeps telling me that he was very good, that he had over 20 years bookkeeping experience and was registered with the HMRC as a tax adviser. I am therefore treading carefully, he holds the previous chap in such high regard that I don't think he will be happy with me disagreeing with his previous advice.
I personally don't have a problem with the garage rent so long as it seems reasonable, ie a similar house with no garage would cost £20 per week less.bThe garage seems to be used wholly and exclusively for the purpose of the trade, but if the landlord gave him a separate invoice for that then all the better.
Again protective clothing is allowable so i would prefer to see some receipts for that but if its a negligible amount I wouldn't be too concerned as I'm sure he will get through a few pairs of work jeans, work boots etc but remind him of Mallalieu v Drummond so he keeps receipts of proper work clothes (not every day clothes).
I probably wouldn't allow the Bt line unless he definitely used it for work and in which case I would add back the rental and only allow for business calls.
Remind him to keep a log book for mileage every year (he probably won't) but if he is a courier I would think 90% business use would be fair.
Telln him the previous bookkeeper did a good job but you just like to ensure your clients are aware of how HMRC might look at things especially when there no invoices/receipts are kept.
Rob, thank you for the reply. I was worried about the garage because the only guidance I could find from HMRC seemed to be in relation to home office use and the need to work out the percentage of floor space used etc. The HMRC guidelines on clothing also read that only clothes specifically for use in the type of work could be claimed for not items of clothing you can wear at other times for example hi vis jackets and steel toe capped boots but not jeans or t-shirts etc. As the client has no receipts as such I was concerned about including an amount for work clothes then (if ever the misfortune of being investigated arose), having to explain this to a revenue inspector.
So would you say that including a fixed amount of say £70 for clothing for the year would not be a problem?
Also, with regards the client's mobile phone, he has to have the type of contract he has in order to get enough inclusive minutes to be able to make calls to customers whilst out on the road and use the internet for maps/postcodes etc. Do you think I should make a percentage deduction from the monthly cost because it is also used when he is not working or should I include the full amount of the contract?
He does note the mileage for the year but I'm trying to get him to note down his start and end mileage each day or failing that at least at the start and end of his working week to get a more accurate figure.
Also good idea about how to handle querying the previous bookkeeper - very diplomatic :)
Matt123 - I don't know what he means by registered with the HMRC but I wondered if he means registered for the purpose of the MLR rather than being governed by a professional bookkeeping or accountancy body?
I have several clients who try to claim for clothing but if they are not protective clothing (as you say hi viz, protective boots etc) I always disallow.
If the rent includes the garage, I would consider adding up the total rooms in the property, including the garage, and doing a fraction such as 1/6th.
I would review the BT bills and consider whether there was broadband, and if so, I would ask the client what % of internet usage was for business. I would then take this % and calculate that on the line rental and broadband figures, and add in any business calls (or just ignore the calls). I would ask the same question about mobile usage %
I would be wary of clothing, and only perhaps allow for steel toe cap boots/or snow boots... and a heavy warm waterproof jacket. I would consider that fair, given his job.
Jeans and Tshirts... no way.
90% mileage does seem fair for you to accept. Its up to him to validate it, in an investigation.
HMRC registered.. possibly just means he is acting as an agent?
