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May questions and answers

Newsletter issue - May 2017.

Q. My company owns a car which is used during the day by various employees for business travel only. However, since there is no overnight parking facility at our business premises, one of my employees takes the car home each night and parks it outside his house. He does not use the car privately. Am I correct in assuming that no taxable benefit arises?

A. Unfortunately not. To qualify for exemption under the pool car rules, the vehicle must not normally be kept overnight on or near the residence of any of the employees. In addition, home to work mileage is counted as private use, so if the car is being taken home every night by the same employee then the private use is unlikely to be considered merely incidental. It is unlikely that HMRC would accept that no taxable benefit arises in this case.

Q. My elderly mother-in-law has an income of around £18,000 a year, which is made up of state retirement pension, widow's pension and attendance allowance. Should she be paying any income tax on this?

A. Attendance Allowance is a weekly amount of state benefit paid to qualifying individuals to help them with personal care because they are physically or mentally disabled and aged 65 or over. It is paid at two different rates depending on the level of care needed. It is however, a tax-free state benefit. If the widow's pension is a War widows pension, it will also be exempt from tax, but if not, then it will be taxable (note that Bereavement Allowance replaced widow's pension some years ago and new claims are no longer accepted). The state retirement pension is taxable but your mother-in-law should be entitled to the personal allowance of £11,500 for 2017/18, which she can off-set against this.

Q. I recently entered into a contract to sell my former trading premises. The sale agreement was unconditional, with a deposit being paid by the purchaser of £25,000. The balance was due to be paid in two equal annual instalments. However, the buyer has now told me that he has fallen on hard times and will not be able to proceed with the purchase. Under the terms of our agreement, he has forfeited his deposit and I have therefore kept this money. Can you please confirm the capital gains consequences of this?

A. If a disposal is made under an unconditional contract, the date of disposal is the date the contract is made. It is not the later date when the asset is conveyed or transferred to the purchaser. For land and property in England and Wales therefore, this is usually the date of exchange of contracts as opposed to the completion date. However, where the disposal (completion) does not in fact occur following the sale agreement, then no disposal in fact takes place for capital gains purposes. The forfeited deposit you kept will be treated as a capital sum received under an Option which is subsequently abandoned, which means it is treated as a one-off receipt in the year.