Cookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.
February Question and Answer Corner
Newsletter issue - February 2010.
Q. Next tax year I will lose £1 of my personal allowance for every £2 of my taxable income that exceeds £100,000. To avoid this loss of allowance, can my wife and I elect for the interest on our joint bank accounts to be treated as belonging entirely to her for tax purposes?
A. The income from jointly held bank accounts must always be split equally between the account holders for tax purposes, you cannot elect otherwise. To move the interest into your wife's name for 2010/11 you need to take your name off the account before 6 April 2010. To achieve this you may have to close the account and open a new account in her sole name. If you have any fixed interest accounts that are due to mature and pay rolled-up interest on after 6 April 2010, you may want to close those accounts before that date. This will ensure the interest arises in the tax year 2009/10 and is taxed at 40% rather than at a marginal rate of 60% if it arises in 2010/11. Check the penalty clauses for closing the account early before you take action.
Q. My company has paid interest on late paid corporation tax. Is that interest tax allowable?
A. Yes. Interest paid to the Tax Office on late paid corporation tax is tax allowable for the company for the period in which the interest was paid. Likewise interest paid by the Taxman because corporation tax has been paid early, or in excess of the amount due, is taxable.
Q. A friend told me I could purchase a van or motorcycle through my company and not pay any tax on it. Is that true?
A. There is a grain of truth in this myth, but there will still be some tax to pay if you use the vehicle for personal journeys. When your company purchases a van or motorcycle for business purposes it will reduce the taxable profits by 100% of the cost of the vehicle. This only applies where the purchase is covered by your company's annual investment allowance (AIA) of £50,000. The AIA cannot be claimed for the cost of cars.
However, when you use the vehicle for non-business journeys there will be a benefit in kind tax charge for you and a NI charge for your company. If you want to transfer the van or motorcycle into your own hands from the company's ownership, this must be done at the market value and again there will be a benefit in kind charge unless you pay the full value to the company. What's more, the disposal by the company will claw-back the AIA given and increase the company's taxable profit for the period in which the transfer is made.
