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Impact of voluntary restitution on taxpayers.
We have been helping a client with a disclosure of historical taxes. They were genuinely unaware of rental income on an overseas property.
HMRC is, however, treating this as careless, so the department is assessing tax years 2015-16 onwards. The covering letter is offering voluntary restitution of the years 2006-07 to 2014-15 and states: ‘Please note this is entirely voluntary, there is no obligation to offer voluntary restitution for these years. If after consideration your client does not wish to offer voluntary restitution for the years outside of HMRC assessment time limits, please let us know and we will arrange to have the amounts paid repaid’. I have occasionally seen these offers and am not aware of any negative impact on the taxpayer, but I wondered if readers have any different experiences with voluntary restitution?
Query 20,423 – Passerine.
Should we add student loan repayments in disclosure?
I have been assisting a new client with a tax investigation. She is self-employed and it is now clear that she has understated her profits for several years. She has admitted this and has made a disclosure to HMRC.
We are now working through the numbers to reach a settlement. There is one aspect of this which I have not come across before and where I would appreciate Taxation readers’ advice.
At the level of income she was declaring, she was under the threshold for repaying her student loan but when the correct figures are used she was over the threshold for each year and, therefore, should have been making student loan repayments.
What are the mechanics for dealing with this? Will the loan repayments simply be included in the settlement figure or does a separate disclosure have to be made to the student loan company?
Further, does the failure to make repayments attract a penalty either on its own or as part of the settlement with HMRC?
Query 20,424 – Supervisor.
Claiming capital allowances on equipment upgrade.
My client has two activities. He is employed by a large company which specialises in genealogical research. He works for them three days a week, largely at home reviewing online material. He also (with the permission of his employer) works for himself providing consultancy services to private clients who are doing their own genealogical research. Again, this work is done mostly at his home.
He has a room set up in his office with high spec computer equipment, printers, etc which he uses for working both as an employee and on a self-employed basis.
His employer provided him with some basic equipment but he finds it easier to use his own higher-spec equipment for all his work.
He is about to upgrade his computer equipment and has asked me about tax relief. How should I go about claiming capital allowances? He says that he will be purchasing the equipment because he needs it for his self-employed business, so there should be no restriction on allowances. He should not be penalised by the fact that he chooses to use his own equipment while working for his employer, given that the employer did provide him with some basic equipment.
I understand this logic, but is it right? Instinctively, I feel that there should be some restriction on the capital allowances to reflect the use of the equipment as an employee. Do other readers agree?
Query 20,425 – Sceptic.
Is there VAT on furniture insurance?
One of my clients sells high quality furniture and, at the moment, all sales are standard rated.
From the beginning of next month, my client has done a deal with an insurance company so that the customer can make an additional payment when they buy the furniture so that the item can be insured for three years in the event of damage. This is an insurance policy and not a warranty arrangement.
- The insurance company will sell a policy with each relevant purchase plus 12% insurance premium tax, eg £50 plus £6 tax = £56.
- My client will add a 100% mark-up and charge the customer a higher price, ie £112 in this example.
- The £112 will be separately itemised on the sales invoice issued to the customer and described as an optional extra – insurance.
My client is not adding insurance premium tax to the £112 and is not a registered insurer. So, should the £112 be treated as an extra payment for the furniture, ie including 20% VAT or a mixed supply of insurance and furniture? I have advised my client to treat the whole supply as standard rated to avoid a partial exemption problem but is this correct?
Query 20,426 – DFJ.
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