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Should standing order be treated as dividend?
I’ve taken over a new close company client and have been reviewing the director’s loan account. Like many business owners she has treated the company’s money as her own and the previous accountant has taken spending on personal items to the loan account as and when he has written up the books for her. But she also has a standing order under which a set sum is transferred to her personal bank account each month. There is no paperwork to support this payment.
The previous adviser has treated each of these individual payments as a dividend and then has cleared the balance on the account post year end by posting a sweep-up dividend. I don’t think that this is right – in the absence of any documentation I think that the regular payments are simply loan account items and are not dividends.
Does this make a difference in terms of which years the dividends fall into? Is there a right answer here or is the pragmatic solution to continue to follow the pattern established by the previous adviser – ultimately everything which should be taxed, will be taxed.
Query 20,239 – Overthinker.
Tax and NI implications of private medical care.
Recently, whenever I meet clients to discuss their accounts or tax returns, conversations – mainly with self-employed persons or the owners of small and medium-sized family companies – seem to turn to the difficulties of getting appointments with GPs. The following question is then normally whether they should pay for private medical care rather than depend on the NHS.
Do readers have any views on whether there is a tax relief for such payments? I understand that there is a benefit-in-kind exemption for medical check-ups, but what exactly does this cover and would any treatment be included? One client wondered whether the new comprehensive blood tests that can identify different types of cancer – and which I understand cost some hundreds of pounds – would be eligible for relief. Given the exemption for employees, I was uncertain as to whether such payments made by a self-employed person would be eligible for tax relief.
Similar difficulties appear to be increasing with regards to dental care. Do the same rules apply here as for medical costs? If a person were to have, say, two dental check-ups a year might both be eligible for relief and would the treatment itself that followed on not be exempt?
Some clients might consider medical insurance, which I presume would not be eligible for relief for the self-employed and would be a taxable benefit for directors and employees. If the policy paid for treatment, am I right in thinking this is not taxable?
Finally, are there any National Insurance charges on these payments for checkups, treatment or insurance?
Query 20,240 – Nursey.
Calculating BIK charge on company motorcycle.
My client tells me that his ‘mate down the pub’ was telling him of the advantages of buying a motorbike rather than a car through his company. The client has a motorcycle license but has not ridden for some years and is keen to return to two wheels. He is tempted to buy a new bike, but I believe it is more likely to be a second-hand model. I think any business use would be minimal so are there any real advantages in his company buying the bike for his use? The company would also, of course, pay for all the running costs of fuel, insurance, tax, MOT, maintenance and the like.
My understanding is that instead of a benefit-in kind (BIK) charge based on price and emissions, there is a 20% charge on cost, but is this of the price when new or the amount paid for a secondhand motorcycle? And how are all the other costs dealt with?
Assuming the 20% charge is correct, does this apply to any use or is there an apportionment if the bike is not used all year round. I think that, after the initial novelty wears off, my client is likely to be a ‘fair-weather biker’ and will not use it over the late autumn and winter months. Could the 20% charge be apportioned or if the bike was subject to a SORN notice for, say, half of the year?
Lastly, could the company recover VAT on the purchase price and running costs and, if so, would any benefit be based on the gross or net of VAT prices?
Query 20,241 – Captain America.
Is there VAT on dog training classes performed in France?
I act for a client who trades as a greyhound dog trainer. She is registered for VAT. All work has, so far, been carried out in the UK but that is about to change because she has taken on a big job with a wealthy lady who lives in Manchester but spends many months at her holiday villa in the south of France. The lady has three greyhounds and my client has agreed to travel to France and give private training sessions to the dogs for a two-week period. My client will stay at the lady’s villa during this period. The lady also has a French VAT number because she sells plants, vegetables and flowers that are grown in her very big garden.
My understanding is that my client will treat this contract as a B2B sale to a VAT registered business in France and not charge UK VAT. The lady will do the reverse charge on her French VAT return. But a colleague mentioned that I should also consider the recent case of Gray & Farrar International LLP. What do readers think?
Query 20,242 – Poodle Pat.
Queries and replies
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