Thursday, 23 August 2012

Company cars - company cars benefit

Did you know the scale benefit on a BMW 520 is rising from 21% of the £30,435 list price to 29% over the next few years to 2011/17.

The diesel supplement of 3% will go.

GPs - transferring the surgery premises to a SIPP

Under the simplified tax regime for pensions that came into effect on 'A-Day' (6 April 2006), GPs can secure valuable tax relief advantages by placing surgery premises that they own into a self-invested pension plan (SIPP).
Before A-Day, people were prohibited from putting commercial property into a SIPP. Now, because the rules have been relaxed, GPs can benefit from tax relief at the highest rate of tax they pay on the value of surgery property - or share in it - that they transfer into a SIPP.
Any growth in the value of the property while it is in the SIPP is tax-free. The GPs occupying the property (or property share) are entitled to tax relief - again at the highest rate they are liable for - on any rent they pay on the property. The rent counts as a tax-free contribution to the SIPP.
While you can instruct the SIPP to sell the surgery (or your share) at any time, you will not be able to get your hands on the proceeds until you are 55.
Not all GP owner-occupiers will be able to take advantage of SIPPs. For one thing, the situation can be complicated by partnership shares and borrowings secured on the property. Specialist SIPP providers and financial advisers can assist in the more complicated cases.
The transfer to the SIPP is an investment decision and as such should only be made if you fully understand the implications. Expert advice from an IFA is essential.
Bear in mind that because of the rise in their NHS earnings since the new contract to an average (and I stress the word average) of £112,000, it is likely that the value of GPs' accumulated NHS pension funds will show significant rises over the next few years. There is some capping of pensionable income to bear in mind and many complications such as the purchase of additional years to take into account.
So you need to consider whether transferring the surgery premises to a SIPP will result in the total value of all your pensions exceeding the new lifetime allowance, currently £1.5 million pounds for 2011/12. A hefty rate of tax rate of 55% is slapped on any excess.
This sounds a lot but the factor applied to Doctors pensions is 20x pension.  Add the lump sum.  Add any private provision and for many doctors, consultants and dentists a pension pot of £1.5m on retirement is quite possible.
Some intriguing tax planning is possible with doctors pension contributions.  Self employed GPs can elect to have their employer pension contributions paid into a private pension.  This has obvious advantages but some disadvantages too.  Pension contributions are a regulated area and expert advice from a qualified professional is essential. I stress advice from an IFA should always be sought before any change to existing arrangements is made. 

GPs can claim expenses - guide

As self employed persons GPs can claim personal expenses which are incurred wholly and exclusively for business which can reduce their tax liability.

Motor Expenses
A percentage of all expenses relating to running a car can be claimed, these include petrol, insurance, road tax, servicing, repairs and cleaning. If your car has been purchased on hire purchase or you have a loan, then a percentage of the interest can also be claimed. The percentage claimed must reflect the business use element of the car. Traveling from home to the surgery is private use and only journeys to patients homes, hospitals and other work related places can be claimed. 

Capital Allowances on cost of Motor Car
A claim can be made for the wear and tear of the vehicle, this is known as capital allowances. This is calculated based on 20% reducing value of the car or if over £12,000 then the capital allowances are restricted to £3,000p.a until the value of the car falls below £12,000. 

Professional use of home
A claim can be made as the majority of GPs will do some work at home. There are various ways to claim, some accountants use a fixed amount per week, others calculate it specifically using a percentage of the running costs of your home. Many GP’s think that if they do claim, there is a capital gains implication when they sell the house. This will not be the case as long as the room is not used exclusively for work

Telephone and Computer Expenses
A claim can be made for the use of home telephone, mobile, use of a computer at home and internet costs if these are used for business purposes. Only the business use element of the costs can be claimed.
Courses and conferences (including travel and accommodation)
These can all be claimed in full, as long as, you do not tack a holiday or sightseeing onto the end of the trip. 

Spouse’s salary
This can still be claimed but only in certain circumstances. Firstly, your spouse must be helping you with your work and you must pay them the salary, preferably, monthly. It is recommended that you have a job description, indicating the type of work and number of hours worked a week. The pay should be realistic for the work done. It is always an area that Inspectors like to look at, so set it up correctly. 

Other Expenses
A claim can also be made for medical subscriptions, drugs and instruments, medical books, journals, postage and stationery. You can not claim for clothes that you wear to work, instead you can claim the cost of dry cleaning.

Recording Keeping
You must keep all invoices relating to any claim for tax purposes for the minimum of seven years. However, if receipts have been lost reasonable estimates can be made.

One of the simplest ways of keeping some of your records, particularly motor expenses, is to have a separate credit card. The Inland Revenue will accept the statements as evidence and this will at least mean you have a record of expenses if you lose the receipts. The credit card should be used for as many business related items as possible.


Self Employed- claim for use of the home

Many small businesses are based at home. If you work from home it is possible to claim a reasonable amount for using a room or rooms at home for business purposes. Costs might include part of the bills for heating, light, water, and mortgage interest.

If you are doing this on a small scale and don’t have all the expense receipts to arrive at an exact figure, it is usually acceptable to claim a modest flat weekly amount provided this is reasonable. You could base it on a sample costs for one month or quarter perhaps. If the home is used for only a few hours a week (e.g. by a builder who does his paperwork at the weekends) then a reasonable claim might be perhaps something between £2 and £5 – per week (i.e. between £96 – £240 per annum, for working 48 weeks a year).

If the claim is going to be higher than this then it is important to keep original bills or evidence of amounts paid and the basis on which the proportion has been calculated.

Note: If you use a room in a home you own, ‘exclusively’ for work, this could reduce the Capital Gains Tax private residence exemption when the property is sold. This is because any part of the property exclusively used for business will not qualify for Capital Gains Tax private residence relief. This problem may be avoided by ensuring there is some domestic use of the study (e.g. keeping a second TV in the study, and using it from time to time for personal enjoyment).