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Expenses
Deductible expenses against self-employed business.
My client is a doctor who, for many years, has had self-employed and employed income. Her expenses have routinely been deducted from her self-employed income.
Because of the pandemic, she only worked for the NHS throughout 2020-21, and that continues to be the case. She has continued to incur costs as before but I am wondering how many of them are deductible from her employment income. Alternatively, is it possible to treat the self-employed business as continuing (with no income) and claim sideways loss relief?
The expenses include subscriptions to professional journals such as the British Medical Journal, subscriptions to professional bodies such as the General Medical Council, subscription to the Medical Defence Society – which is in effect professional indemnity insurance – and the cost of attending continuing professional development courses, which my client pays for herself.
Readers’ views on how much of this can be deducted, and the best way of doing so, would be appreciated.
Query 19,883 – St Elsewhere.
Mixed funds
Claiming remittance basis on dividends from abroad.
My client is a non-domiciled UK resident. She came to the UK in mid-2015 and has been claiming remittance basis.
She is a 10% shareholder in three trading companies abroad and has credit shareholders’ loan account balances with these companies, as have the various other shareholders. The companies are non-UK resident for tax purposes and there is no UK double tax treaty with her home country.
Dividends voted are credited to these loan accounts for all the shareholders, at their request. All the companies have the cash to pay the dividends, but the shareholders wish to have this arrangement. At various times, funds are paid out against my client’s loan accounts for foreign expenses and monies are also transferred to her UK and non-UK bank accounts.
Do readers consider the shareholders’ loan accounts are mixed funds, akin to bank accounts, despite the three companies having meticulous Excel records of what is the constituent amount for each shareholder and the shareholder instructing to ‘remit £10,000 from my 2019-20 dividend to my ABC bank account in the UAE and £50,000 from my pre-arrival capital to the UK bank account’?
My initial thoughts are that these are mixed funds and hence, despite what the client is saying she has remitted to the UK, the mixed funds rules would need to be applied to ascertain the tax treatment of amounts remitted to the UK?
I would welcome readers’ thoughts.
Query 19,884 – Remy.
Homeworking
Tax issues with converting workspace at home.
More people are working from home at least some of the time. In many cases they have converted a spare bedroom in their house into an office and claimed tax relief for working at home (as employees or as self-employed as the case may be).
I know that it is prudent to advise clients in this position that there is a risk that only or main residence relief may be restricted when their house is sold, but has anybody actually had a case where this has happened?
I can see that if a room is converted into, say, a doctor’s surgery there may be an issue, but is there really a problem with a room with just a normal desk and computer?
How cautious are Taxation readers when advising clients on this point?
Query 19,885 – Homesteader.
Rent invoices
Input tax on rent invoices addressed to the director.
I act for a consultancy business that trades as a limited company and occupies office premises for 15 staff. The VAT complication is that the office lease is between the landlord and the company director, and not the company.
This arrangement was agreed because the landlord wanted the extra security of knowing he could pursue an individual for any unpaid rent rather than a company with very few assets. The landlord has opted to tax the property, so charges VAT on the rent and addresses all invoices to the individual director.
HMRC has now done a compliance visit on the company and disallowed input tax claimed by the company for the past four years on the basis that the supply of office space is to the director. The officer says that the director should have registered for VAT and opted to tax his interest in the property, charging VAT on the rent to the company and claiming input tax on the charge by the landlord.
This does not seem right to me: the offices are wholly used by the company for its VATable business activities, so surely it can claim input tax? The company directly pays all rent from its bank account to the landlord.
Readers’ thoughts would be appreciated.
Query 19,886 – Property Pat.
