What is the tax position of a free company lunch?
My daughter is the sole employee of a company owned by the two directors.
Every Thursday, the three of them go out for a modest lunch near the office, paid for by the company. She has asked me what the tax implications are, but it’s not my area of expertise.
I think the technical position is the VAT can be claimed on her lunch, and on the directors’ lunches if they can justify a business purpose (eg work discussion/motivation of staff), but there would be an income tax benefit on the cost for all three.
Is there any way of arguing against the potential income tax charge? If they had a staff canteen, available to all employees (even if there is only one plus two directors), providing lunch would be tax free. Readers’ more practical, as well as theoretical, answers would be welcome.
Query 20,563 – No such thing.
When does inquisitive officer need to explain her methods?
I am dealing with an enquiry into a client’s disposal of some worthless shares in 2022-23. Every time we provide more information, the officer asks for more. Now they want ‘all correspondence, notes of meetings and telephone calls’ in relation to a number of events.
As far as I can see, this is a straightforward situation: the client invested in a property development project through shares and loans. The project did not go well: the shares became worthless, but the loans were eventually repaid with interest.
The result is CGT relief at 20% and income tax at 45%. The officer was entitled to ask questions, but at what point does the officer have to explain what they are looking for?
I have read CH21620, which says ‘you must be able to show why seeking the information or carrying out the inspection may help you decide what the correct tax position is’ and tells the officer to strike a balance.
I have asked the officer to explain and they have threatened the issue of information notices. Do readers have any suggestions?
Query 20,564 – Harassed.
UK taxation of Central Provident Fund.
We have a client who has worked in Singapore for many years but has now returned to become resident in the UK.
As he was Singaporean resident for a number of years he (and his employer) were required to make contributions into the Central Provident Fund (CPF) which appears to be Singapore’s social security system.
An individual’s CPF can comprise a number of different accounts – an ordinary account, a medisave account, a special account and a retirement account. It appears that the different accounts can be used for different purposes, so for example the medisave account can be used for approved medical insurance and medical expenses, and the ordinary account to buy a house or fund mortgage payments. The special and retirement accounts are designed to provide for pension payments on retirement. Monies in the ordinary account and special account can be invested in, for example, unit trusts. All accounts receive interest at a good rate.
We have seen the statements for the accounts and can see a combination of entries including the following: a) monies leaving and entering the accounts in relation to unit trust investments; interest received; contributions from the employee and employer in relation to delayed pay (ie pay earned while non-resident); withdrawals to pay for medical insurance.
It is unclear how these elements should be treated for UK tax purposes. Should our client be taxed on income and gains as they arise in these accounts, or are they effectively a pension wrapper and as such only taxable when subsequent pension withdrawals are made. Also how are the medical insurance withdrawals treated?
We have searched all HMRC guidance together with our research information and haven’t found any commentary on the subject. Help!
Query 20,565 – Greg.
Input tax on tickets of overseas parent company staff.
We trade as a limited company in the UK, buying and sells computer equipment; the company is registered for VAT and can fully claim input tax.
Our parent company is based in France and ten of its staff will attend a three-day computer exhibition and conference in the UK, which will mainly promote issues about marketing techniques in the evolving world of computers and AI. There will be educational and training sessions within the conference which should benefit the staff who liaise with UK customers before giving us the order to supply the goods.
As we will directly benefit from the enhanced knowledge of the French based staff after the exhibition – with increased UK sales – we will pay for all ten tickets for the event. The organiser will invoice us and not the parent company; the parent company will directly pay for the flight, meal and hotel expenses of the staff.
I have two questions:
- Can we claim input tax on the ticket costs, even though they relate to the staff of another business?
- Can the parent company claim UK VAT paid on the hotel costs, even though it does not have a UK VAT registration number or business establishment here?
Query 20,566 – Pierre.
Queries and replies
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