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Can I continue acting for client?
I act for a private company which has two (unrelated and not otherwise connected) shareholders who each own 50% of the share capital. I don’t act for the shareholders individually.
The company is profitable and the shareholder/directors extract large dividends each year. One of the shareholders came to see me last week and said that there had been a big falling out between the two of them. He also told me that he believes that the other shareholder has not been declaring the dividends he received from the company on his tax return. He can’t prove this, but has heard him boasting about ‘beating the tax man’.
What are my professional obligations here given: (a) I don’t act for either director; and (b) this is only an allegation? Do I have to make an AML report or cease acting for the company? It has been a good client over the years and has been a significant source of fees, so I am reluctant to give it up but, of course, if I have no alternative then that is what I will do.
Query 20,279 – Moral.
Effect of squatters’ occupation on tax deductions.
For many years my client has been letting out a property. His last tenant – who had been renting for several years – gave notice that he was vacating the house so my client thought that he would take the opportunity to redecorate and carry out some updating work.
Unfortunately, while the property was vacant, a family of squatters moved in. Despite my client approaching the police for help, he had to take civil action through the courts to obtain possession. This took several months. My question is on the tax treatment of the redecorating and updating costs that my client now wishes to go ahead with. My understanding is that if the property is let again after the works are complete then the costs will be deductible from the future rent.
However, my client has found the whole experience so disheartening that he is now thinking that rather than re-let the house he will simply sell it. In that instance is there any means to obtain a deduction for these expenses?
My client also incurred legal costs in recovering possession. Would these be deductible against any future rental income? Alternatively, if he does sell, could this be included in the capital gains tax calculation?
What do Taxation readers think?
Query 20,280– Landlord.
In what year is a redundancy payment taxed?
I act for a medium sized company which is going through some difficult times and will have to make some workers redundant in the near future.
Over and above statutory redundance pay it is planning only to make payments in lieu of notice. It accepts that under the new 2018 rules such payments are taxable in full and that employees don’t benefit from the £30,000 exemption.
The question concerns timing. Quite a few of the employees concerned will be earning just under £50,000 and therefore (to the best of the company’s knowledge) they are unlikely to be subject to the high income child benefit (HICB) charge this year. However if the three months’ pay in lieu of notice is taxable in 2023-24 that is likely to bring them into the HICB charge and clearly the company doesn’t want that to be a knock on effect of being made redundant. So my question is: in what year does the payment get taxed? Is it by reference to the termination date or the date of payment? My client is planning to make the redundancies by 31 March 2024 (its year end) but it could make the payments on 6 April if that were effective in taking them into the following tax year.
Can readers give me a steer?
Query 20,281– Bearer of Bad News.
Is botox treatment a mixed supply for VAT purposes?
One of my clients is a registered medical professional. His main trading activity is to provide cosmetic treatments to patients, including botox, face lifts, liposuction, etc.
He is not registered for VAT because he splits the invoices issued to his patients in two parts, along the lines of the following example:
- A doctor consultation fee of £200 is charged before the botox treatment starts; he treats this as exempt from VAT as medical care. It will include a skin mole check as well as addressing other concerns about the outcome of botox treatment.
- The invoice then separately charges the botox treatment fee of £150, which my client accepts is a cosmetic procedure and is VATable.
- The exclusion of the £200 consultation fees from my client’s turnover means that he trades below the annual registration threshold of £85,000 as far as taxable sales are concerned.
Do readers think this is this correct?
Query 20,282– Avony.
Queries and replies
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