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Post Info TOPIC: What to claim for on a tax return


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What to claim for on a tax return
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The lady I met last night does her own books with a P & L sheet ready for accountant.   Her figures showed (say) £17000 net profit and former accountant had (say) £14500 nett profit.  I didn't have time to study in depth the two breakdowns but one thing immediately caught my eye was working from home (say) £600   The lady operates from premises so I queried it and she said he sticks that down because I do my books from home.  There was also a small amount for motor expenses, which lady said she had no input to but she does use her own car for business use on occasion.

Question is this:  Can accountants add or subtract things, possibly in accordance with industry standards?  My understanding is that you can only go on the paperwork you have, and had I done the tax return would have submitted her figures, assuming they were right.  I explained that the accountant had saved her around £700 tax and I wouldn't (as a bookkeeper) have have been able to do that (purely because I don't have the knowledge of what additional things are claimable)

 



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John



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£600 is quite high - I thought it was£4 per week. Does the premises have an Office? I'm assuming there is no milage log to backup the figures?

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Matthew



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I think it was £3 per week then up to £4 per week that you could claim without it being queried. Now it's based on the amount of hours per month worked at home.
To claim £12 a week would require some calculations to back up that figure.

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I only saw a small room at the back with a table and presumably this was a rest room.  £4 a week is the accepted figure that HMRC won't query, and is the one additional figure I put down for clients that don't have premises to work from.  However I read recently that even this can be disputed by HMRC if the person is self employed, if it can be proved that the client does insufficient work from home to justify it.  I need to look into that further to see if it will affect any of my current clients.

No mileage logs and he never asked for any estimated figures.  That's basically the question I'm asking, are you ok to do this sort of thing?  Somehow he's reduced her nett profit by £2500 thus saving her around £700 in tax & NI.  

The crux of the questioning is because I talked myself out of taking the client on, by pointing out how much the accountant had saved her and saying, as I was a bookkeeper rather than an accountant, I wasn't able to do that.  It has also given me extra determination to become a qualified accountant so I am in a position to reduce a clients tax bill in a similar way, presuming it is permissible to do so.

 



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John



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I always look at it from a tax inspectors point of view. If he/she was to question that amount, with no milage log or records how could the client backup the figure?

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Matthew



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The rate that "wont be questioned" is £4 a week. Anything over that is subject to further scrutiny, in the event of an investigation.
Then its between the client and the inspector... or no doubt, the accountant and the inspector.
One assumes the accountant would provide explanation on the calculations for both mileage and UOH. And the Inspector can decide whether that seems fair.
Its possible that the accountant had a conversation with the client to glean a general idea, and its also possible the accountant explained in a covering letter with the accounts..
I have seen clients not remember such conversations/letters.. and I've also seen accountants who don't have a clue what made them include a figure!

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For sole traders the £4 per week use of home (to be put in without query) doesnt apply.  This applies only to employees of limited companies.

For sole traders you either apply flat rate where the use the home

25-50 hours per month             £12 per month

51-100 hours per month           £18 per month

101+ hours per month             £26 per month 

(not much that you can only claim £312 per year if use your home 101+ hours each month.) Plus if you use your home less than 25 hours per month you cant claim anything that month.

Other alternative is to work out the actual area use/room used and claim appropriate % of costs.  Usually rent/mortgage interest, buildings insurance, council tax, gas/electricity, telephone, internet.

Mark



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Providing accounting, bookkeeping, payroll and tax services to small and medium sized businesses across Central Scotland and beyond.



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Hi Mark, sorry thought we were discussing what the client's accountant did in previous, not the way forward.

Do you have a link to the new rates schedule, please hun? The HMRC one I have is showing £10 a month for 25-50 hours. I assume I must have the link for 2013-14 then? Is £12 the new 2014-15 rate?





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PS.. HMRC will still accept £4 a week for sole traders who work less than 25 hours at home.

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Peasie wrote:

I think it was £3 per week then up to £4 per week that you could claim without it being queried. Now it's based on the amount of hours per month worked at home.
To claim £12 a week would require some calculations to back up that fi

 Thanks, when did this come into force please?



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John



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FoxAccountancyServices wrote:

PS.. HMRC will still accept £4 a week for sole traders who work less than 25 hours at home.


 This is how I've always understood it Michelle.  Can you point me to the relevant source that this is still applicable. given the new self employment rates indicated further upthread. 



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John



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Thanks Guys for your help. I wanted to clarify certain things and you've helped me do that. Just out of curiosity, if there was an investigation and the Tax Inspector said the 2500 wasn't claimable, who is responsible, the business person or the accountant? 

 

John 



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John



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Sort of both the business owner and the accountant although the primary responsibility remains always with the business owner.

The business person is responsible for :

  • Keeping adequate financial records
  • Preparing financial statements
  • The financial standards upon which such financial statements are based

Often they will hire a professional (such as yourself) to assist in the above but such does not absolve them of their responsibility.

The professional is responsible for :

  • What they knew
  • What they ought to have known
  • What they ought to have done about it.

If the professional was negligent then it is down to the business owner to sue the professional for any loss that the authorities (i.e. HMRC) impose on the owner of the business.

However, bad advice may result in all clients of a practice being investigated and in a case of genune systemic negligence the PII company is unlikely to pay out.

On the use of home I'm with Mark on this one.

kind regards,

Shaun.



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Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



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111 Bookkeeping and Payroll wrote:

Thanks Guys for your help. I wanted to clarify certain things and you've helped me do that. Just out of curiosity, if there was an investigation and the Tax Inspector said the 2500 wasn't claimable, who is responsible, the business person or the accountant? 

 

John 


 The business person.  They signed the accounts and tax return confirming the figures, so they cant just blame the accountant.  HMRC will ask why they signed the document without fully understanding the figures.  

So, its a good idea to try and get your client asking the accountant for a calculation that backs up this figure.  So that if there was an investigation, you have something to provide HMRC.  

 

Its possible your client could sue the accountant, if they got fines, but this is a legal matter and one I wouldnt know how to advise on.  I just know that HMRC wont accept "I left it to my accountant" as an excuse.



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111 Bookkeeping and Payroll wrote:
FoxAccountancyServices wrote:

PS.. HMRC will still accept £4 a week for sole traders who work less than 25 hours at home.


 This is how I've always understood it Michelle.  Can you point me to the relevant source that this is still applicable. given the new self employment rates indicated further upthread. 


 I rang HMRC and they asked a technical advisor.  Thats my source :)



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Not sure why someone working less than 25 hours a month can claim the £4 a week - that's £16(ish) a month.. more than allowed for someone to working 25-50 hours... Good old HMRC, again!

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