Company Unpaid NICs – Company Directors Liable

A company called L Wear Limited went into administration in March 2007 owing HMRC £321,307 in unpaid NICs.  Under Section 121C of the Social Security Administration Act 1992  HMRC are allowed to issue personal liability notices (PLNs) when a company has failed to pay NI contributions and that failure is “attributable to the fraud or neglect of one or more individuals who were, at the time of the fraud or neglect, officers of the company” .

The HMRC duly issued a PLN against the Finance Director, Mr O’Rorke.   He appealed the PLN claiming that he had been suffering from an addiction which affected his behaviour.  The Tribunal found that the state of mind of the individual forms an essential ingredient of assessing liability.

This  means that even if company directors do not consciously act negligently they could still be held personally liable for  unpaid NICs.    However, this is not the end of the case, so it will be interesting to see how things progress.

The Cost of Travelling from Home to Work

For the taxpayer, generally the cost of travelling from home to work is not an allowable expense.   Carrying on significant business activities at home does not necessarily mean that travel between home and another place where business is conducted is allowable.   It is useful to establish where the business is carried out.   It is normally clear cut if the taxpayer owns or rents business premises.    However there are some types of business where the taxpayer has no office away from their business but visits clients away from their residence which is normally allowable.   In the case of Newsom v Robertson (BIM37605), a barrister worked partly at his chambers and partly at his home.   This case highlights how the business base needs to be established in each individual situation.

BIM37620 makes specific reference to the ‘itinerant’ trader.  An itinerant trader travels from their home to a number of different locations to complete a job of work, after which, they attend a different location.   Their base of operations is at their residence therefore costs of travelling between the residence and the sites at which the trader works is normally allowable.   A typical example would be a jobbing builder.

Further to the ‘itinerant’ trader, it is also worth reading  BIM3765 which references a case of travel costs from home to business in the case of a milkman who chooses to reside away from his round.

National Minimum Wage from 1st October 2013

The minimum wage rates which come into effect from 1st October 2013 are :-

£6.31 per hour  – the main rate for workers aged 21 and over
£5.03 per hour – workers aged 18-20
£3.72 per hour – workers aged 16-17 (above school leaving age but under 18)
£2.68 per hour – for apprentices under 19 or 19 or over and in the first year of their apprenticeship

What accommodation can qualify as furnished holiday lettings?

To qualify as a furnished holiday letting the accommodation must meet all four of the following conditions :-

  • Must be furnished.
  • Must be available for letting to the public for at least 210 days for 2012/13 onwards, previously 140 days.
  • Must actually be let for at least  105 days for 2012/13 onwards, previously 70 days
  • Must not be let for periods of longer-term occupation for more than 155 days during the year.

Furnished Holiday Lettings

Profits from furnished holiday lettings are taxed as a trade for tax purposes and therefore have some tax advantages over other types of lettings.  Such as:-

  • Entitlement to capital allowances on furniture, furnishings, and white goods used in the letting property, as well as on plant and machinery used outside the property (such as vans and tools)
  • Capital Gains Tax  relief is available when the property is sold such as, business asset rollover relief, entrepreneurs’ relief, gift relief and relief for loans to traders.
  •  Profits count as earnings for pension purposes.

NB Sideways relief for losses against general income was abolished for 2011/12 onwards.

Renting a Room Relief

Profits from renting a room in your home to lodgers are normally exempt from tax if they are below £4,250.

Sale of a Letting Property

Profits from the sale of a letting  property are subject to capital gains tax.  The first £10,900 is exempt.  Basic rate taxpayers pay tax at 18% and higher rate taxpayers pay tax at 28%.

What is Capital Gains Tax.

Property Income

Income from UK and overseas properties are tax on an accruals basis not a receipts basis.  Tax relief is available on the Interest element of the monthly mortgage payments, as well as factoring fees/letting agent’s commission/council tax/building and contents insurance and repairs, although some types of repairs will be treated as enhancement expenditure and won’t qualify as a repairs, instead relief will be given when the property is sold.

Tax relief is generally not available on the following:-

  • Furniture, fittings, white goods, crockery and linen where the wear and tear allowance is claimed.  Replacement cost may be used in stead of the wear and tear allowance.  Where the replacement method is used not relief is claimed for the initial cost of the item.
  • Any large repair costing more than 50% of the value of the item is capital expenditure, not revenue, such as a large repair to the roof of the letting property.
  • Reburbishment or upgrading of  the property is capital expenditure.  Relief is given when the property is sold.

Minimum Holiday Entitlement

On the 1 October 2007, the Statutory Holiday entitlement was increased from 20 days per annum to 24 days, and will be further increased to 28 days from 1 April 2009 (pro rata for part-time staff). These figures are based on working a 5 day week. As a transitional measure, employers will be allowed to continue to buy out the additional leave entitlement introduced from October 2007 until 1 October 2009.

Employees must take 4 weeks of their holiday entitlement in their holiday year. It is up to employers whether holidays on top of this can be carried into the next holiday year.

National Minimum Wage from 1st October 2012

The minimum wage rates which came into effect from 1st October 2012 are :-

£6.19 per hour  – the main rate for workers aged 21 and over
£4.98 per hour – workers aged 18-20
£3.68 per hour – workers aged 16-17 (above school leaving age but under 18)
£2.65 per hour – for apprentices under 19 or 19 or over and in the first year of their apprenticeship