Tag: tax tip

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Tax Tip – Recharging expenses vs disbursements 

If you pay for something on behalf of your customer and then invoice it to your customer you may be able to treat it as a disbursement. This will be an advantage if the supplier doesn’t charge VAT or if the customer can’t reclaim VAT.  

When invoicing disbursements to your customers you don’t add VAT and you can’t claim VAT on the purchase because you are acting as an agent. 

A disbursement must meet 8 conditions. VAT: costs or disbursements passed to customers – GOV.UK 

Most business purchases are expenses, not disbursements, and you should add VAT to the amount that you invoice to your customer. You can also reclaim any VAT that you pay your supplier. The amount you charge your customer is a commercial decision so it may be the cost, or the cost plus a mark up, or any other amount that you agree. 

Some examples of costs that are usually recharges and not disbursements: 

  • Train ticket to visit your client or to travel as part of their job. You should add VAT to any recharge because the flight is for you and not the client. 
  • If recharging postage to your customers you should add VAT even though postage is usually exempt. 

The most common recharge we see is mileage. You can claim the standard mileage allowance (usually 45p but see mileage rates: https://minervaaccountants.co.uk/tax-tip/tax-tip-38/) and reclaim any VAT on the fuel element. When recharging this to the client you would add VAT to the rate (which may be 45p or something else) that you have agree with them 

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Tax Tip

Eye test and glasses  

If you run a limited company and need to use a screen for your work then you can claim the cost of eye tests against tax. You can also claim for your employees which is a small, tax free perk.  

Sorry, sole traders and partnerships can’t claim this. Yet another example of where the rules are different for limited companies and unincorporated organisations. 

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Tax Tip

Mileage rates 

The simplest way to claim your car costs against tax is to claim the standard HMRC allowance of 45p per mile. Most business owners are familiar with this but there are circumstances when the rate is different. 

  1. Above 10,000 tax miles per year the rate is reduced to 25p per mile in recognition that many of the fixed costs have already been covered. 
  1. Carrying a business passenger the rate is increased by 5p per passenger 
  1. If using a BICYCLE rather than a car the rate is 20p per mile 

This standard allowance is to cover: fuel, MOT, insurance, maintenance, road fund licence. It does not include parking and tolls. 

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Tax Tip

Penalties are increasing from this month. These are completely avoidable if you keep proper accounting records and keep them up to date.  

We send our clients several reminders in addition to the reminders that they get from HMRC but, even if you use and accountant, you are responsible for ensuring that everything is submitted correctly, and on time. 

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Tax Tip

As we go into the new tax/payroll year don’t forget to tick the box to claim your Employment Allowance to offset your employers’ national insurance. From 2025/26 this is a maximum of £10,500 per year.

Most small companies can claim unless:

  • You have just one director and that director is the only employee above the secondary class 1 NI limit (currently £5,000pa from 2025/26)
  • If you have a group of companies then only one company in each group can claim the allowance.
  • If more than half your work is in the public sector then you can not claim the allowance.
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Tax Tip – Casual staff 

If you’re taking on seasonal staff over the Christmas period then the normal employment rules apply.  

  1. They must go on the payroll and NOT be paid ‘cash in hand’ 
  1. They may be eligible for a pension under autoenrollment. You can defer this for 3 months which may mean that you don’t need to provide a pension if they are with you for less than this 
  1. If they are self employed you should have a contract to this effect confirming that THEY are responsible for paying their own taxes 
  1. Use the HMRC employment status indicator to see whether they should be employed or whether they can be self employed Check employment status for tax – GOV.UK 
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Tax tip

Capital gains tax when selling your home.

If your home has always been occupied as your principle private residence then any increase in value is probably covered by Private Residence Relief so no tax is payable. BUT, if your property has ever been rented out, left unoccupied, or served as your second home then you may have to pay capital gains tax within SIXTY DAYS of disposal.

Estate agents and solicitors don’t usually mention this to their clients so it’s up to you to remember to avoid late filing and payment penalties.

There are various exemptions and allowable costs so we’re happy to do the calculations for our clients to see if they need to pay. (We don’t do them for non-clients as, frankly, they’re done manually so they’re a pain.)

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Tax tip

Research and development tax credits are a government incentive to encourage companies to invest in INNOVATION. Over recent year HMRC have tightened up on what qualifies for research and development tax credits.  

Please ensure that your research is original work. 

Your project may research or develop a new process, product, or service or improve on an existing one.  

You must explain how your project: 

  • Looked for an advance in the field 
  • Had to overcome the scientific or technological uncertainty 
  • Tried to overcome the scientific or technological uncertainty 
  • Could not be easily worked out by a professional in the field 

Much of the ‘research’ that businesses previously tried to claim is now being rejected.  

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Tax Tip

This week saw the release of the quarterly ICAEW South West business confidence monitor. Have a read to see how the region is feeling about doing business. Do you feel the same?

Although generally positive late payments and increased regulation are worrying many.

In a separate survey, almost 50% of businesses said their costs had risen because of the increase in the National Living Wage. Almost 20% put up prices to cover the increase. Around 20% have already improved efficiencies, including using automation and investing in technology. Others have closed pay gaps and increased upskilling of staff in response.

On Friday 2nd August at 8.30am ICAEW will be holding an online discussion and overview of the results for the South West Region, led by ICAEW Head of Business, Simon Gray and Ed Tellwright from the British Business Bank – to join us please register here.

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The King’s Speech 

At the state opening of parliament King Charles announced the following economic measure on the agenda for the new government 

  • Audit reform and corporate governance – long overdue and something that ICAEW have been pushing for 
  • Using the independent OBR (Office for Budget Responsibility) to assess any significant and permanent tax and spending changes – this makes a lot of sense 
  • Great British Energy to accelerate future technologies for clean power – we have a number of clients working in this area who will be pleased to hear that they can move forwards 
  • Streamlining the delivery process for critical infrastructure such as the national grid and renewable energy 
  • Generally improving employment rights – while this may come at a cost to employers the best ones are already doing most of these things anyway 

And lots more

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