Allocation of Costs for Self-Employed Minister?

Self-Employed Minister Trains as Accountant to Book-Keep for a Number of Charities.

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Every year I get the simple p&l accounts for a self-employed minister from another accountant in order to deal with the minister's annual tax returns. The minister runs a small church and does the bookkeeping for a number of related church charities. He gets no income from the related church charities, only from his own church. Covid has resulted in church income dropping, and all of the charities would struggle to pay the going rate for a charity accountant.

The p&l accountant has deducted from the minister's self-employed turnover the following new costs for the first time:

a) Minister's professional membership of an accountancy body

b) Minister's bookkeeping training costs with that accountancy body

c) Minister's AML Supervision fee with that accountancy body

d) Small ICO fee

E) Minister's Small DBS fee

I am inclined to disallow all three accountancy overheads under a) to c) above on the basis that these are costs relating to the related church charities and not costs of his own church. I suspect however that the minister may try to argue he incurred the costs to enable him to do the bookkeeping for his own church.

There is no question the minister is training to become an accountant. He merely wants to be able to do the bookkeeping for the related church charities as well as his own books as cheaply as possible.

I would assume that the DBS is a cost relative to the running of his own church, hence allowable.

As far as the ICO fee is concerned, if this was a cost of running his own church I will allow, if not I will disallow.

Please let me know if you disagree on any of the above and why.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Replies (5)

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By paul.benny
02nd Jul 2021 16:24

I'm not a tax specialist so treat everything I say with a pinch of salt. (Why am I am responding, do I hear you say. Exactly)

Signing up to professional membership as well as embarking on training seems to be taking it very seriously. Ditto the fact he's signed up for AML supervision.

It seems to me that client is demonstrating genuine intent to have a second self-employed trade/profession. He can't charge fees until he has a PC and so has initial losses- but then so do many start-ups.

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By Laurence52
02nd Jul 2021 17:04

Item b) training costs unlikely to be allowable as capital in nature rather than revenue.
See BIM35660 relating to proprietor's training courses:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35660

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By thomas34
02nd Jul 2021 18:28

Had to read this post several times to understand the problem. On the face of it I'd allow the lot on the basis that (a) I think he already does the book-keeping for his own church and (b) the charities may in due course pay him for his work. As far as training is concerned it depends upon whether it is carried out with the purpose of trading i.e. usually pre-trading or is to update skills already being used. The inference is that he's already doing the job. I accept that training and subsequent trading could take place within one year - hence the caveat.

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By Winnie Wiggleroom
03rd Jul 2021 06:42

b) As mentioned above you need to read BIM35660 - is this updating an existing skill that is already being used in his trade or a new qualification that will allow him to start a new trade?
a & c) - is similar to b in a way in that you need to ask whether or not these are wholly and necessarily incurred for the current trade.
Could you argue that his book-keeping duties are already part of his duties as a church minister?
I assume that he is self employed and not paid through payroll

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By Tax Dragon
03rd Jul 2021 08:16

Everyone (including OP) is guessing why the costs were incurred. Give me the minister's number - I'll give him a call to find out the actual purpose(s) and post back.

I'll also need to ask him about how he makes his money, as it sounds like he's not on a stipend. I'll ask whether he minds if I include details of that in my reply here.

If he says yes, I think that additional information will enable y'all to have a much more fulfilling discussion.

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