.png)
.png)
Check or enquiry?
Can HMRC issue information notice without enquiry?
A plumber trades through a limited company and works for a maintenance company (Main Co). HMRC has questioned the working arrangement, but without opening an enquiry under FA 1998, Sch 18 para 24. It has requested a list of clients for the past three years, copies of all contracts or agreements with them, and a copy of the MainCo contract.
I reviewed the MainCo contract and did not think IR35 applied (there is no requirement to work personally; no agreed times; free to determine how work is done; makes good at own expense; no obligation to accept work and suchlike). I sent HMRC a copy of the contract and advised that although the client could work for others he had not yet done this.
The client receives 50% of the job value, pays a 1.5% commission and uses a MainCo van for which he pays £500 a month, which can be varied at any time.
HMRC has now asked for more information under FA 2008, Sch 36 para 1 and has requested a client meeting.
I responded that the information already supplied should be sufficient to satisfy the IR35 check and I was concerned by the level of further information requested given notice for full enquiry had not been served.
Although I can provide the information, if there is no enquiry my costs would not be covered by fee protection insurance. I would add that the notice to the client to provide information does not mention an enquiry has been opened.
What is the difference between an enquiry and check? In response to my letter, an HMRC officer says it has not initiated an enquiry but checking status under a PAYE audit. There is no requirement to issue a notice and the information is needed for a holistic view. Must I respond as requested?
Query 19,439– Enquirer.
Building contractor
VAT on using own company to build home.
My client is a building contractor who operates through a limited company jointly owned by him and his wife.
He is now mooting the possibility of building a new residence for himself and has asked me for advice on whether he should do this, either through the mechanism of the DIY builders’ scheme or arranging for his own construction company to build the house for him.
If his own construction company, which is involved in new housebuilding, were to build the house, presumably it could charge the work to him personally and he would reimburse the company, with VAT being charged at the zero rate.
If he were to go down this route, would the VAT incurred by his own construction company in terms of making an ongoing supply to him, only be validly incurred for business purposes if the company were seen to be making a reasonable and fair profit?
Also, what are the benefit in kind implications? If he reimburses the building company at cost plus a small handling fee for materials acquired, would this present any difficulties?
What do readers think?
Query 19,440– Bob.
Charitable accounting
Streamlining accounting for charitable trustees interests.
We act for a registered charity whose main object is to provide sporting facilities for youngsters. The charity is not registered for VAT.
Some time ago, the charity built a sports pavilion on Ground A. The sports pavilion has a bar and a function room which is hired out. A separate company was formed to conduct the trading activities of the bar and hire of the function room. The company is registered for VAT. The company’s net profit is gift aided to the charity.
Ground A also has cricket and football pitches which are hired out. There is no option to tax exercised on the grounds and this income and expenditure (mainly ground maintenance) has always been accounted for in the charity.
The local council has provided a purpose built youth centre and cricket and football pitches on Ground B which has now become the main centre of the charity.
There is no lease between the charity and the limited company for Ground A.
The charity trustees would like us now to account for the hire of pitches income and the ground maintenance expenditure from Ground A in the limited company accounts. Their rationale is that this provides ‘centre based’ accounting for the two grounds; in other words, Ground A in the limited company and Ground B in the charity.
Taxation readers’ views would be much appreciated on whether this approach is possible?
Query 19,441– Charity Clarity.
Pension problem
Unused pension premium relief from earlier years.
Some clients are thinking of making contributions to personal pension plans and were wondering whether there is unused relief from previous years that could be taken into account.
The first client was enquiring on behalf of their spouse who has no earned income. I am aware that gross contributions of up to £3,600 a year can be made, but if they have not paid into a pension scheme in previous years is there unused relief available from those earlier years?
The second client has been earning about £30,000 a year from their self-employment for some years. Is there unused relief that can be brought forward? She had been told (this sounds like pub talk) that unused relief could only be carried forward if some pension contributions had been made in those earlier years.
I would very much appreciate some definitive advice here.
Query 19,442– Pensioner.
