Author: Amit Roy

Tenant paying rent to a non-resident Landlord directly – no agent involved

Gross rent can only be paid to the landlord after written confirmation is received from HMRC by the tenant.

Process:

Landlord will contact HMRC (Non-resident telephone helpline) and give details of tenant. Then HMRC will write a letter to the tenant authorising them to pay gross rent without deduction. Till then rent can only be paid after deduction of tax at basic rate (currently 20%).

Sample letter below:

Sample NRLS Approval Letter

Change of tenant or agent

Landlord or his tax agent needs to call HMRC NRLS Helpline on 0300 322 9433 and inform them about the change. Before the call get Agent’s NA number as HMRC will need it to send the authorization letter to the right agent.

PAYE Tax Code change resulting in employer being out of pocket

My client employs a nanny for his children. This used to be nanny’s second job and we were using `BR` tax code to process her salary.

She left her first job, making this her only job. We advised her to call HMRC to get her tax code changed. HMRC sent us a notification with the changed tax code.

On changing her tax code on the payroll software it resulted in a massive refund for the nanny. This refund employer has to pay from his own pocket.

This client has only one employee and after change of tax code future months PAYE bill would also be zero thus no scope of set off with future months PAYE bill.

I called the employer helpline, they were very helpful and they advised me to apply for a funding via link: https://www.gov.uk/payroll-funding

Via this link either employer or agent can apply for funding.

HMRC advised me that if the application was approved, funds would be credited in the nominated account in circa two weeks’ time from date of application.

Amortisation of Intangibles

Many businesses spend substantial monies on intangibles like building websites, advertisements etc and the question crops up how to treat them for taxation purposes.

Sole trader/ partnership Not Allowed
Limited Companies Allowed under under `Corporate intangible assets regime`.

 

Tax deduction follows the accounting books.

See HMRC toolkit: Capital Vs Revenue Page 4.

 

Moral of the story:

  • Use the toolkits regularly.
  • Please use the current year’s toolkit

Expenses and benefits: cash sum payments to employees

As always the starting point for all questions relating to employee benefits is A to Z on gov website, link given below:

https://www.gov.uk/expenses-and-benefits-a-to-z

The question in hand, an employer a construction company (shop fitters) gives cash sums to employees when they are staying overnight away from home for accommodation  and meals

C – Cash Sum payments to employees

https://www.gov.uk/expenses-and-benefits-cash-sum-payments

I have listed below two main types of expenses paid by employers – private and business. Business expenses have been further categorised in four types.

  Type Description Tax Liability
A Private expense You pay employees private expense. Always considered as employee earnings. Tax + NIC
B Business Expenses
1 Reimbursement of actual expenses You pay expenses on submission of expenses receipts by employees. You will need to apply for exemption with HMRC.

The Application form is simple with additional guidance.

 No Tax or NIC
2 Round  Sum Allowances You pay an employee regardless of how they spend the allowance. Tax on full amount

NIC :  Allowance minus expenses
3 Scale rate payments You pay at a level agreed with HMRC. The employee has to actually spend the scale rate payment on business expenses.

 

Again the process of applying for exemption is same as in point 1.

 

 

 No Tax or NIC
4 Special arrangements with HMRC

 

Certain employments have special rules for taxation of employment income see EIM 50000 onwards

 Construction industry workers are covered under a special scheme – `Working rule agreements` see below EIM 71300. No Tax or NIC for payments up till the approved rates

EIM 71300: working rule agreements

  • Applies to employees in construction and allied industries.
  • Applies only to travel and lodging allowances.
  • Apply only were payments made according to strict terms and conditions of this rule, for these details go to HMRC manual EIM 71300.
  • Neither employer nor the employee need to be a member of any federation or trade union.

 

Conclusion:

It’s advisable to apply for scale-rate payments exemption with HMRC as per point 3.

 

Franchise fee tax deductible?

A very clear answer is given in HMRC Agent tool kit – Capital Vs Revenue: Page 15

Sole Trader/Partnership Capital Expenditure. No deduction in computation of trading profits.

Deduction available under Capital Gains Tax on sale.
Companies Special Corporate intangible assets regime applicable.

Deduction available as per accounting treatment – amortisation over the lifetime of the franchise agreement is normally allowable.

This again demonstrates how useful agent toolkits are and should be used regularly.

Link to Took kit

Moral of the story:
When taking a franchise always take it under a limited company.