January Question and Answer Section
Newsletter issue - January 2012.
Q. I want to close down my consultancy company and pay the funds it holds to me as the only shareholder. Should I wait until the new tax year or start the process now?
A. If permission is granted from the Taxman in advance (called a C16 clearance), the funds the company distributes to the shareholders during the winding-up process will be treated as a capital gain and taxed at 10%, where Entrepreneurs' Relief applies.
However, the law will change on 1 March 2012. From that date where more than £25,000 is distributed to shareholders in anticipation of the winding-up of the company, the entire amount of the distributed funds will be treated as income and taxed like dividends. That means Entrepreneurs' Relief cannot apply and the rate of tax due on the distribution will leap from 10% to 25% or more. The capital gains treatment can still be achieved if the company is put into formal liquidation, but that is likely to cost £7,000 or more. So if you want to wind-up your company and it holds more than £25,000, get those funds paid out by 1 March 2012.
Q. My energy bills have soared since I started using a room in my home as the base for my company's business, as I have to have the heating on all the time. I've heard that my company can pay up to 1/3 of my gas bills tax-free, is that true?
A. Your company can pay you (as the company's employee) £3 per week, £156 per year tax free, for working at home and no evidence has to be provided to support that payment.
If you can prove your heating bills increased because of you heating the property while working there, when otherwise it would be empty and not heated, then your company can pay that extra heating cost to you tax free. However, if the Taxman asks, you will need to provide copies of the gas bills for a period before you worked at home compared to a similar period when you have worked at home, to prove the increase in costs. The Taxman may also want to see a schedule of the days you work at home and days when you work at clients' premises. This type of claim is referred to as 'use of home as office' which can also cover other costs incurred in running your business from home. Contact us for further guidance.
Q. I received a letter yesterday addressed to my new company, asking for a payment of £320 to register the company on the 'Intercom VAT Registry'. Should I pay this fee? Is it compulsory?
A. Do not make any payment or respond to this letter. It is a known scam. The 'Intercom VAT Registry' does not exist and it is not an official EU body as the letter suggests. If you are ever suspicious about letters or emails your business receives, check them against the list of known fraud on the Action Fraud website: https://www.actionfraud.police.uk/. We are more than happy to check any suspicious correspondence you receive, so contact us if you are unsure of the legitimacy of any letters or emails sent to you.