Member Since: 9th Aug 2001
2nd Dec 2016
Thats very interesting. I always thought that the option to tax was a very weird thing to have done. I assumed the previous owner did it to get input tax relief on his build costs, but as you say the FHL income was vatable and therefore attributable input tax could have been claimed.
Is an 'ineffective option to tax' just your way of saying it was pointless, or is that an actual piece of terminology that means that the option does not really actually mean anything at all?
21st May 2013
This all sounds like standard contract law to me. You have a contract with ex-partner for sale of share, agreed consideration £25k. If he has not paid, you sue under that contract.
You have a contract for the work done, £900. If you did not get paid, you sue under that contract. Who are the parties to that contract? You and ? If your ex partner asked you to do the work, in the name of the old company, then thats the other party you would have to sue. Not much point if they have no assets and dont exist. If you have evidence he asked you personally, I suppose you could sue him personally. Only if you have anything which indicates that he asked you as director of the new company then you can sue them.
If however he requested you to do the work after he had commenced the wind down of the old company, and if the company was insolvent when he asked you do the work, he might just have put himself personally in the frame.
If you have fallen out with him badly, then you will need to take legal action to recover, and then you are on the classic horns of the dilemma - spend money to get money, or throw good money after bad. If however you have just taken umbrage because he has started a new company, and assumed its all dodgy, its worth bearing in mind that its not uncommon to start a new company on a change of control, because as we all know when you take on a company you take it warts and all. So a new company might be just a clean way of protecting himself from any risk of undisclosed historic liabilities. So as a wise person says above, get in touch and try and sort it. Might be much more fruitful than legal action.
29th May 2012
And yes as other posters have said, disengagement letters should be used, and they should clarify not only the date of ceasing to act but also the cut-off of any work carried out.
I have a client who had a payroll done by the previous accountant but one. The last employee left on week one of the new tax year before ceasing to act. 13 months on, the P35 did not get filed. Client thought old accountant should/had done it, old accountant thought he had ceased to act and was therefore not responsible, yet his last bill had referred to '...completing & finalising the payroll to cessation of employees...'. Next accountant was bloody rude about the whole thing, hence my client now :-)
No disengagement letter, so no clarity who had done what.
I think all the accountancy bodies recommend them, certainly ICAEW does. And as a way to ensure that the liability cut-off point is correctly identified I use them on the obviously very rare occasion when a client leaves me (ahem ahem).
29th May 2012
I have a personal dislike of things which should not be done but are not challenged. Thats why people / firms / governments continue to do it.
Your client should join in the fun and write back and say that far from accepting this letter, he would like to know the specific acts or omissions that the firm is trying to avoid liability for, and if they were liable otherwise before the cessation to act, why would cessation now negate that liability. Ask also for details of their professional indemnity insurance policy, details of their complaints policy and contact points, and confirmation that they recognise that they remain liable for failures of professional standards for damages incurred whether the act or omission occurred at any time in the past or in the future irrespective of cessation to act.
I would imagine that they are as likely to answer that as they are to get clients to sign their disengagement letter...
5th Sep 2011
Interesting reply and hope this is not too late to get your attention.
I had the same query as in the last para, which you seem to have dismissed, which I will invent some numbers to illustrate. Take a £300k property, assume £30k IF's, that leaves £270k as the 'freehold'. Own the property for 10 years, sell for £500k and assume, pro rata, £50k for IF's.
As far as I can see the tax position on sale is:
All IF CA's on disposal will be a balancing charge on disposal (unless, exceptionally, there were a very large pool of IF's so that the disposal proceeds did not sent the pool negative?)
Capital Gain will be £450k-£270k on the property and £50k-30k on the IF's.
So that means that the IF CA's simply give some temporary tax relief during the ownership of the property which you have to give back on sale (assuming as above increased value).
I think the original poster was considering that if he did not claim CA's on the IF's then it would simply be that the sale and acqusition figures were £500 and £300 (which works out the same anyway).
Is that the correct interpretation of what you are saying in your post?
27th Jun 2011
This is excellent stuff, I am very grateful to the people who take the time to contribute to these threads. I have a director in similar position, except that her reason for low salary is simply that there is no money being made by the company yet. My (much less technical) argument at the moment is that she is in 'expectation' of income for the work she is doing. No idea how it will turn out, but it seems very very wrong to deny tax credits to a directors in genuine low income circumstances when a self employed person is "allowed" to make a loss and still claim!
11th May 2011
This is a real pain in the...
Yes, I have a client with similar problems. Irregular shift patterns, etc etc. I spent many hours devising a spreadsheet to record hours and days worked, 12 week previous average rates, accrued and taken holiday and so forth. And it needs careful scrutiny for mid-year starters and leavers, too, averages easily get screwed up under those circumstances.
Guidance for your client is - this is the law we have no option, we have to follow it. If that means telling employees that their holiday pay entitlement can only be measured in hours then so be it.
Dont forget that there are 2 parts to this issue. Law states that your employees are entitled to 5.6 weeks of paid absence. The 2 parts are that they are entitled to 5.6 weeks of absence, and 5.6 weeks of pay. How much you pay, and when, and how much time off they have had, is a complex matrix to manage. Your client needs to bring in systems which record actual hours worked, actual days worked. And remember too that this is an opportunity for you to help your client bring better systems into place and charge them for it.
9th Mar 2011
Finally I understand - client right after all
Section 378 (1) (b) says that the deduction is allowed if the duties of the employment are performed wholly or partly outside the United Kingdom.
Section 379 (1) (a) says the deduction is … is allowed from the amount of the earnings from the employment…, and same section (1) (b) says it is equal to that amount.
So it is correct that if there is a voyage which starts and ends in a foreign port during any part of an employment then the duties are partly performed outside the UK and the whole of the wages in that employment (which fall into an eligible period) qualify for SED.
9th Mar 2011
Hi Helen, looks like its just you and me!
Thanks for your comment.
I have had more discussions, and it seems that at least one of the seafarers tax specialists takes the view that there needs to be one foreign port call per employment and then all earnings in that employment qualify for SED (assuming the other conditions about period and type of work are met).
I think that is the view that you expressed, too.
But I cannot see how that works in relation to the actual legislation, which refers to specific voyages.
Have you come across any official pronouncements which cover this at all?
8th Sep 2010
Employed is safest
It is true that you will have liability to sick pay and holiday pay, but they are unlikely to be large amounts of money and that will pale into insignificance against a determination later on the it was a 'disguised' employment and the charity/trustees have to cough up for back tax and so forth. Bear in mind the charity has probably got an even higher responsibility through charity status not to misuse the funds it holds. A paye investigation which goes bad could be a problem with the charity commissioners.
And in reality the difference is minimal. He is over retirement age therefore is not personally liable to NI. The amounts are likely to always be below the employers NI threshold. And as a self employed person he would pay tax on all he earned whether through the charity payroll or as a self employed person (unlikely he would have any real expenses against his income, and if he did, he could still claim them as an expense against employment).
So why bother with the risk?