Is sleep training a medical service and exempt from VAT?
A new client has an unusual business activity; she gives advice and training to parents who have babies or very young children with sleeping problems. Some of her services are carried out in the homes of the parents; in other cases, she will do online training and advice sessions. She charges an hourly rate for all her work.
My question concerns VAT: she is a qualified doctor and says that all her work is therefore exempt from VAT, so she does not need to register. I am not sure because she is working for the parents rather than the children, but it does sound reasonable. Her annual sales are nearly £140,000, so she would have exceeded the registration threshold four years ago if her income is taxable.
This issue is causing me sleepless nights, so readers’ thoughts would be appreciated.
Query 20,723– Snoozy.
Lack of direction?
My client is a family company with a mother and father, two adult daughters and one external shareholder. Each of them holds 2,000 of the 10,000 issued shares. The mother and father and the external shareholder are directors and are all involved in the management of the business. The mother wants to step back and there is an outline proposal for the company to buy back 1,900 of her shares, leaving her with a nominal 100. Because the daughters are over 18 years of age, they are not associated with their mother and therefore the substantial reduction test is met and the mother will not fail the 30% connection test.
The plan is that the two daughters will become directors. The mother will remain a director but will play no further part in the day-to-day management of the business; however, she will still have a say in any strategic decisions.
Do readers think that there will be any problem obtaining clearance on the ‘benefit of the trade’ point here? There will be a distinct change in her role going forward.
Query 20,724– Worrier.
How will the pension salary sacrifice rules work in practice?
I have been wondering how the new pension salary sacrifice rules will affect some of my clients when they are introduced in a few years’ time. The rules seem straightforward – a denial of National Insurance (NI) relief on annual pension contributions of more than £2,000 a year if these are made subject to a salary sacrifice.
But will these rules apply if the pension contributions are negotiated when a worker is first employed? For example, let’s say that an employer offers a salary of, say, £60,000 and £10,000 paid into a pension scheme, which is accepted by the new employee. Is this deemed to be a sacrifice of £10,000 of salary?
Two thoughts occur to me: what about the auto-enrolment rules and what if the employer might not have offered an extra £10,000 salary instead, given the additional NI costs?
Also, what about directors of family companies? One client used to have contributions made directly to his personal pension plan by his company. However, for the past few years he has required more salary and dividends to pay for family financial commitments (school fees, etc) and has forgone the pension contributions. If, in a few years, he wants to reinstate the company pension contributions, will this be seen as a salary sacrifice?
I hope that Taxation readers will be able to provide some clarification here.
Query 20,725– Pensioner.
Dollar loan
My client made two loans to an individual who is resident in a country where they use US dollars. The loans were for $200,000 each, paid out of my client’s sterling bank account at different dates in different sterling amounts (£166,000 and £163,000). Interest was to be rolled up until the loans were repaid, which has just happened.
The interest on one loan is calculated as $68,000 and on the other as $41,000, and the capital is also being repaid at the same time.
I think that there will be a capital gain or loss on the principal, based on the rates of exchange at the start and finish, and the interest will be taxable as income, but I would like to confirm the detail of the calculation.
Can I simply compare the amount that was paid out of my client’s bank account and paid back in (ie actual exchange rates), or do I have to use HMRC exchange rates? And is the interest simply the difference between the sterling equivalent of $200,000 at redemption and the sterling amount received?
Query 20,726– Buckstop.
New queries
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