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Homeworking confusion
Understanding the homeworking allowance.
I understand that the homeworking allowance works either by the employer paying the employee a tax-free amount up to the limit, or if not the employee can claim tax relief on an amount up to the limit.
HMRC says that the allowance is £6 per week (tinyurl.com/5h3w4jaw). My assumption was that this meant that if the employee was only working from home for part of the year, then claims could be made only for those weeks. Similarly, if the employee ceased employment after, say, 30 weeks then the relief would end at that point.
But I’ve seen it suggested that a full year’s allowance is due even if there is only one day on which the employee works at home, and that this is even the case if the employment ceases during the year. Is that right and what it the statutory basis for the relief working that way?
Secondly, what about people who are already home based? HMRC’ website says: ‘You may be able to claim tax relief for additional household costs if you have to work at home on a regular basis, either for all or part of the week. This includes if you have to work from home because of coronavirus. You cannot claim tax relief if you choose to work from home’. So, if an employee has negotiated a home-based contract with their employer does that mean they have chosen to work at home and thus is ineligible?
Finally, I am mystified by the HMRC online process. It is simple until I you get to the question ‘Did you start working from home because of coronavirus?’ If I say yes, I am directed to apply online. If I say no, I am asked whether I had five or more jobs. Why does this make a difference?
Can readers assist?
Query 19,763 – Adviser.
VAT on fuel
VAT on diesel in plant hire machinery.
My client is a construction plant hire company. The business buys red diesel in bulk which goes into two fuel tanks they have on their site. If the supply is below 2,300 litres the fuel is subject to the reduced 5% rate of VAT.
The plant and machinery is hired out with a full fuel tank to the customer and the litres of fuel supplied each month are duly declared on the red diesel returns. On occasion, customers who hire plant for a long time may require additional supplies of fuel which they call back into the depot for and collect in jerrycans.
When an item of plant has been off-hired and returned to the depot my client refills the tank and the customer is charged for their usage.
Historically, my client has charged the customer VAT at 5% on the fuel both supplied in jerrycans and that used to top up the plant on its return, as being below the de minimis limit, but we have heard of cases recently where VAT inspectors are insisting that VAT should be charged at 20% as being part of a single supply.
Do readers believe that the VAT inspector’s approach is correct?
Query 19,764 – Sceptic.
Loan
Gift of loan and treatment of chargeable gains.
My client has sold an asset into a trading company at market value, with the consideration left outstanding as a loan. There are no particular terms for the loan and it is not a debt on a security.
The shares in the company are held by a discretionary trust. If my client were to gift the loan to his son and the company make repayments of the loan to his son over a period of time, would TCGA 1992, s 251(4) apply to the repayments of the loan such that a chargeable gain arises on his son?
If so, would the base cost of the loan to the son be the actual value of the loan at the time of the gift, in accordance with s 17(1)(a), such that the chargeable gain is nil? Section 17(2), which states that s 17(1) does not apply if there is no corresponding disposal, does not appear to apply in this case since there is a disposal of the loan by my client but no chargeable gain arises on that disposal (s 251(1)).
I look forward to receiving replies.
Query 19,765 – MM.
Renovation
Is neighbour's letter sufficient for 5% VAT on building work?
My client is a builder and last year did a lot of work on a bungalow that was in need of major renovation.
He charged VAT at 20% to a building contractor. The contractor has belatedly asked my client for a 15% VAT credit on the basis that the property had not been lived in for the two-year period before the work started, so labour and materials were subject to 5% VAT.
The contractor has provided a letter signed by the person who lives next door to the property, confirming that it had been empty for more than two years because the lady owner was transferred into a nursing home.
There is no other evidence of the empty period – should my client issue the VAT credit to the contractor? I can’t see why the credit is important anyway because the contractor is VAT registered and can claim input tax.
Query 19,766 – Bob.
