Monday, 05 November 2018
When it comes to personal tax, there are always issues that get us accountants excited (well relatively!). Three current hot topics are:
Claiming for tax deduction of clothing
For many years clothing of any sort has not been tax deductible, unless it was for specific safety reasons. This stemmed from a famous case, which a barrister lost, attempting to claim her gowns etc., as tax deductible. Simply put, the items of clothing didn’t pass the ‘wholly and exclusively for the purpose of the business’ on the basis that they were also used for ‘warmth and decency’.
However, HMRC lost a recent appeal by a taxpayer who had claimed deductions for clothing worn whilst working. The taxpayer was a self-employed exotic dancer, and had claimed for such items as clothing, lingerie, dry cleaning, make-up, beauty treatments and hairdressing. HMRC had refused the claim and imposed penalties. The taxpayer appealed.
The tribunal accepted the taxpayer’s evidence that the outfits bought to perform at the club could not be worn out of doors, nor could they be described as providing ‘warmth and decency’. Her shoes were designed for pole dancing and were unsuitable for outdoor wear. It concluded that all of the items of clothing, together with the make-up etc. were all deductible because they were solely for her performances.
The outcome of this case means that we should consider in detail whether expenses could be claimed due to the nature of the work being undertaken.
Making Tax Digital (MTD)
We continue to advise clients about MTD, which is effective from April 2019. MTD will apply to all businesses trading above the £85,000 VAT threshold and will require them to keep digital records and submit VAT returns with digital software. There is a concession in the legislation that a business might be excluded from MTD ‘for reasons of disability, age, or remoteness of location or any other reason’.
It’s not clear why the age concession has been included when HMRC has not given any further detail. Most things age-related are clearly defined by a relevant age, e.g. pension, bus pass, concessionary admissions. Many UK adults are still unable to carry out basic computer tasks, and so going from completing a VAT return with nine boxes, four times a year, to the requirement to maintain all accounting records in a digital format may not be possible for many. If HMRC don’t issue further clarification, the likelihood is that they will receive thousands of requests for exemption on the basis of age!
You may already be aware of the campaign to reduce the VAT rate in the hospitality and tourism industries. Wetherspoons, in support of the campaign for VAT cuts, recently held a ‘tax equality’ day with a one day 7.5% cut on beer and food prices. The campaign seeks to highlight the lower VAT rates enjoyed by supermarkets selling similar products, which the pub sector has linked to a 25% shrinkage in the industry. The campaign also points to the reduced VAT breaks the industry benefits from in most of the EU states. Campaigners claim that a reduction in VAT rate will generate more spend and increase the tax income. The Treasury, however, is sceptical that this will be the case and is concerned that the £12 billion generated from the sector could be at risk. It’s interesting to note that The Democratic Unionist Party has been encouraged to seek a reduction by the Northern Ireland tourism industry as part of their agreement with the Conservatives. Maybe once we leave the EU VAT regime we may see some further consideration that the campaigners have been seeking.
As always, if you have any queries or would like more information, you can contact me on 01473 833411 or firstname.lastname@example.org