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Should I provide additional information in tax return?
I am currently preparing my client’s accounts and computations for the year to 31 December 2022.
Normally the cost of repairs is relatively insignificant but in 2022 the total expenditure was much higher than usual. I’ve discussed this with my client and I am satisfied that the expenditure does fall on the right side of the repairs/improvements line.
My question is whether or not I should make any additional disclosure in the return – either in the computation itself or in the white space. If I draw attention to the figure in this way it might suggest to HMRC that I am nervous about the deductibility and thus prompt HMRC to open an enquiry. While I am sure that any enquiry would vindicate my position, I would clearly prefer not to put my client though the hassle and expense of an enquiry in the first place.
What would readers do? Is there any advantage in proving extra information?
Query 20,135 – Handyman.
Do expenses create a problem for an EMI scheme?
My client’s firm offers eligible employees enterprise management incentive (EMI) options. One of the conditions for favourable tax treatment is that an employee must meet the working time requirement.
For those working for the company for more than 25 hours a week that is no problem. But those working less have to be able to show that 75% or more of their working time is spent working for the company.
One of the employees who has been granted options worked two days a week and volunteered in a local charity shop on an unpaid basis for two days. Unpaid work does not count as working time so she qualifies. But she has now been asked to take on the role as the manager of the charity shop. This attracts an ‘honorarium’.
This is a fairly nominal sum (which works out as less than the NMW) and is not by any reckoning a commercial rate for the job. But if this counts as working time, then it means that she has four days’ total working time and only two of these are spent on the company’s business, so her EMI options would cease to qualify.
This seems a harsh result. Do readers have any experience of what HMRC’s attitude is likely to be in these circumstances?
Query 20,136 – Concerned.
Is there VAT to charge for coaching sessions?
I act for a client who provides executive coaching services for high-flying individuals looking to promote their careers in senior management positions.
She recently did three days of coaching for a person based in Germany – two of the sessions were performed over Zoom but for the third session, the person came to London and they did face-to-face training in a hotel conference room.
My client has not charged VAT on her fee to her customer on the basis that the customer is permanently resident outside the UK – living in Germany – and therefore outside the scope of UK VAT but I am not sure.
As a separate question, she trades as a limited company but would the supplies have been exempt as private tuition if she was a sole trader instead?
Readers thoughts would be appreciated.
Query 20,137 – The Coach.
Incorrect zero rating of listed building work.
One of my clients is a builder and did some work last year enlarging windows for a private residential school in Rugby. My client added 20% VAT to his quotation but the school said that the job was zero-rated on the following basis:
- The school is a listed building.
- The work in question required listing building planning consent from the local authority so is classed as an ‘approved alteration’.
- The building in question is only used as residential accommodation for the pupils rather than classrooms.
- The headmaster quoted HMRC’s Notice 701/30 on education, para 15.1, stating: ‘Where the work is the construction of a new building, or carrying out of an approved alteration to a listed building and after the work the building will be used as residential accommodation for students or school pupils, or by a charity for non-business purposes, then the work will be zero-rated.’
To my horror, I read a news item in Taxation saying that para 15.1 was an error by HMRC and was corrected on 6 February 2023 – apparently, zero-rating for all work on listed buildings ended in 2012.
What do readers suggest my client does about the incorrect zero-rating?
My view is that he should let sleeping dogs lie because he followed HMRC’s advice in its published guidance but I’m interested in other views.
Query 20,138 – Tom Browny.
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