The Fizz! Blog

Can my company pay for this cost? A useful heuristic

If you’re wondering whether it’s appropriate for your company to pay for something, think back to a time when you were employed by someone else.

If you’d made an expense claim for it, would they have repaid you without thinking twice?  If so, in most cases it’s going to be fine for your own company to be paying it.

Or would they have told you where to go?  In that case, it’s probably not fine for your own company to be paying for it!

Someone recently told us of someone they know who is always finding some conference or other in the vicinity of a place they want to go, on the grounds that attendance for a day will make their entire holiday legitimately payable by their company and tax-deductible.  Of course it won’t!  And the technique we’ve outlined here works perfectly.  If you tried to claim that from a third party employer, not only would they not pay it, they’d probably take disciplinary action!

Maybe you had a mean employer before, who’d outrageously refuse perfectly legitimate expense claims.  But if you had a normal, reasonable employer, something they’d not have paid for is generally unlikely to work as a cost for your own company.

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If you have a limited company, avoid using the word “claim”!

Often, people trading through a limited company will say “I am a limited company”. They are not a limited company, they are a human who owns a limited company. Their accountant should keep picking them up on it and correcting them, not to be pedantic, but because cementing the difference in your mind is important.

Company owners early in their “journey” (sorry) will often ask “can I claim cost X?”. A better perspective is to think “is this a cost which should properly be paid by my company?”. The rent on the Fizz offices isn’t somehow “claimed” against tax. Fizz just pays it, obviously! Fizz doesn’t “claim” the salaries of our staff. It pays them. Equally, when the directors are out and about travelling for meetings and the like, we just pay for our train tickets with a company debit card to begin with, straight out of the company bank account. Job done. There’s no reason, in the limited company world, for the word “claim” to be used, other than in the specific context of employees making formal expense claims for things that they’ve necessarily paid themselves and need to be reimbursed for.

Companies don’t claim things, they pay for them. If you can separate the company and yourself in your head, then life becomes a lot easier.

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How can I find out how much bank interest I’ve received?

Earning interest on cash in the bank is a good thing for savers, needless to say! But it does mean that a lot of people do now have to disclose interest to HMRC on their tax return, never having done so before. And, based on the frequency with which we’re asked about it, it can be quite tricky to figure out how much you’ve received in a tax year. In the olden days, banks would generally send you a paper certificate giving you the numbers. That’s pretty rare now.

There’s a good chance you can get the equivalent certificate/numbers from the banking app on your phone, but that’s not always the case. Based on a small sample at the time of writing, we reckon two of the three mainstream banking apps we looked at could provide an annual interest summary, though in neither case was it exactly where we’d expect to find it. A fourth told us via chat that they could post a certificate out on request, but also told us we could download it from a particular bit of the app - it wasn’t there, though.

If it’s not on the app, you might well be able to get the certificate/summary from online banking.

If not, then - you’re just going to have to look at your bank statements for the year and add the interest up! Sorry.

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Can I save tax on my Audible subscription?

Are you a sole trader who only listens to things related to your business? You can save tax on the entire cost.

Are you a sole trader who listens to both things related to your business and other stuff? You can save tax on the percentage of the subscription that you think fairly reflects the business part.

Are you a limited company owner who only listens to things related to your business? The company can pay for the whole subscription and save tax on the lot.

Are you a limited company owner who listens to both things related to your business and other stuff? Unless the personal element is more or less incidental, you should just pay the sub yourself; there’s no provision equivalent to the sole trader one for somehow splitting it, and if the company pays for it then you’d have to pay tax on the cost. Fortunately, it’s hardly an expensive thing to have to pay personally.

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What does the abolition of the Furnished Holiday Lettings regime mean to you?

If you don’t own an FHL, nothing! And even for some people who do own one, not much. But for some owners, the impending end of their special tax regime will make a difference.

Historically, rental properties that tick the boxes to be classified in this way (broadly, available for rent most of the year, actually rented to holidaymakers most of the time, and not to the same person for an extended period) have received special tax treatment. From April 2025, that will no longer be the case.

The revisions will remove the tax advantages that furnished holiday let landlords have over other property businesses:

• At present, unlike other residential property income, a landlord can save tax on all the associated interest payments - owners of conventional Buy To Lets can save 20% at most. Individuals owning an FHL will face the same restriction.
• FHLs have had more generous Capital Allowance rules. But they’re going, and instead the owner will get the same “replacement of domestic items relief” that other property businesses have.
• Capital gains tax reliefs based on disposing of a business asset will no longer apply to FHLs.
• FHL income will no longer be included within relevant UK earnings when calculating maximum pension relief.
• At the moment you can effectively allocate the profits to either owner of a jointly owned FHL, but under the new regime they will have to be split according to normal ownership rules.  These rules refer to the underlying legal ownership of the property - you'll need to refer back to how the ownership was set up when you bought it, and your accountant can tell you what that means for your rental profits

If you own properties that currently qualify for the FHL tax regime, you should definitely consider if and how the changes are going to affect you. They may make no difference to you - but they’re definitely not going to make anyone better off.

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Small businesses aren’t responsible for tax evasion - tax evaders are

Back in September, a National Audit Office press release regarding tax evasion got a lot of coverage - in particular, its assertion that 81% of tax evasion was down to small businesses.

Two thoughts:

1. Tax evasion is down to tax evaders. It’s not somehow perpetrated by small businesses as a class. If a takeaway is using sales suppression software to hide income from HMRC, that tells us absolutely nothing about small businesses generally. It tells us that at least one person within that particular business is a criminal.
2. If 81% of tax evasion is down to small businesses, that means 19% must be down to larger businesses. Looking at the report, that means companies with sales revenue of between £10m and £200m a year (the report attributes zero tax evasion to businesses larger than that). This is more surprising! Businesses of that size generally have segregation of duties, external auditors, governance committees and so on. How on earth are they somehow managing to deliberately evade tax at an organisational level?

The second point (if the statistics are to be relied upon, anyway) is surely the more interesting story! If anything, you’d think 100% of tax evaders would fall into the “small business” category because that’s where checks and balances can be dodged.

In fairness, the report itself does drill into particular activities (like sales suppression software, and phoenixism), and it’s clear that HMRC are trying to look at those areas specifically. But headlines smearing small businesses generally are not especially helpful to anyone.

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Is it time to actually withdraw your Director’s Loan Account?

At any point in time, most directors of small limited companies either a) are owed money by their company or b) owe money to their company.  The former is obviously a nicer place to be in general.

Money owed by a company to a director can accumulate for lots of reasons, including funds actually lent to the company to get it started, expenses or mileage not yet reimbursed, allowances for working from home and so on.  Historically, many directors have been happy to let this Director’s Loan Account build up.  If you don’t need the money in your own life right away, you might well be happy to leave it where it is rather than risk frittering it away!

That was all very well when interest rates were next to nothing.  It didn’t matter too much whether you had the £30,000 or the company had the £30,000.  Nobody was going to earn interest on it, so if its purpose was to be a rainy day fund, it was fine left in the company.  Now, however, interest is a real thing!  If the director gets her loan repaid to her and puts it in a savings account, she’ll probably earn interest of £100 a month.  And some of that’s going to be tax-free, even if it’s not in an ISA.

The company could itself put the money in an interest-paying account of course (and, if the director is going to leave the money where it is, it probably should).  But the company will pay corporation tax on all of the interest, and then when the director one day takes that extra money out of the company, she’ll pay tax too!

So, think of making savings work for you, and if you’ve money in your company that you can draw out tax-free, now may well be the time to do it.

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Worry less about whether costs are tax-deductible, more about how much profit you’re making!

One of the most common questions from people new to business is - what costs can I set against my income when working out my tax bill?  This is both completely understandable and largely wrong-headed.

It’s easy to assume that the point of keeping accounting records is to enable you to fulfil your legal obligations - your accounts, your tax return, maybe your VAT returns.  They’re useful byproducts of accounting records, without doubt.  But the fundamental point of the accounting records is to record how well or badly you’re doing.  If you’ve lots of costs, or your profits are low, that’s important information that you might want to address (by considering whether the costs are higher than they need to be, or income/margins are too low, or if you should just get a job, for example).  The fact that most or all of the costs may be tax-deductible is really a consolation prize - tracking and contemplating them is the key thing.

To put it another way - would you rather have a) £100,000 of revenue and £20,000 of costs, none of which are tax deductible, or b) £100,000 of revenue and £70,000 of costs, all of which are tax deductible?  Hopefully you’d prefer the £80,000 of profit over the £30,000, even if the tax bill is a bit higher!

In fact, most costs that you incur as a result of starting your business are going to be tax deductible, so that extreme example is a bit silly.  Hopefully, though, it makes the point - focus on profit, not tax.

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HMRC's fuel-only mileage rates - make sure you're reclaiming all the VAT you can

Taxman-approved fuel-only mileage rates changed on the 1st June.

These are the rates that HMRC are happy for employers to use a) to reimburse staff for fuel used for company business that they've paid for and put in company cars, or b) reclaim from staff the cost of company fuel they've used for their own private motoring.  But they're also the rates that businesses can use to reclaim VAT on some of the mileage allowances paid to employees and directors.

Employers can pay a mileage allowance of up to 45p a mile, tax-free, when employees use their own car for business (plus 5p a mile if they've got a colleague with them!).  That hasn't changed, it remains 45p.  You can’t reclaim VAT on all of the 45p, but you can reclaim VAT on the part that represents fuel, as long as you retain VAT receipts covering the cost.

The new list of rates is here:

https://www.gov.uk/guidance/advisory-fuel-rates

If you're VAT registered, not on the flat-rate scheme, and failing to reclaim VAT on your mileage costs at all, you should start.  You can even reclaim some of the VAT you've missed out on in the past.

There's also an advisory rate for fully electric cars, which has gone down from 9p to 8p a mile.

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Avoiding the Child Benefit trap, revisited

The advice for parents trying to avoid being drawn into the High Income Child Benefit Charge (HICBC) has been unchanged since 2013, as none of the thresholds ever changed. Since they have, at last, been increased, here’s an update on actions you might take to avoid or mitigate the charge.

If the higher earner in a household that has received Child Benefit has income of more than £60,000, they have to start giving the Child Benefit back to the government again, on a sliding scale, via their Self Assessment Tax Return. If they have income of more than £80,000, they have to give it all back.

If both parents earn £60,000, that's therefore fine - nothing to give back, even though total household income is £120,000. But if one earns £80,000 and the other zero (or a single parent has income of £80,000) then all of the Child Benefit has to be given back, despite household income being £40,000 lower!

If you've two children, HICBC could mean giving back £2,200 of Child Benefit to the government.

The most obvious way you could avoid or reduce the charge is with pension contributions. If your income is £70,000, then paying £10,000 into a pension reduces your income to £60,000 for these purposes, and you get to keep all the Child Benefit (as well as saving £4,000 of tax too - the way the tax reliefs work means that getting £10,000 into their pension ends up costing that person only £6,000). Of course, if you're struggling with household income to begin with, or earning way over £80,000, things may not be as easy as that and HICBC may be unavoidable. But if you can stand the short-term cashflow hit, for those around the fringes of the charge, pension contributions can become very compelling - and the more children you have, the greater the saving!

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