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Any Answers Answered: 40% rule and company profit

1st Feb 2019
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Workplace expenses and profit distribution are perennially popular topics on AccountingWEB, and this month TAXtv hosts Tim Good and Giles Mooney answer readers' questions on both of these issues.

To watch the full video of Good and Mooney answering readers’ questions, click here or scroll down to the bottom of the page.

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Workplace expenses and the 40% rule

Firstly, the TaxTV team considered AccounitngWEB member blackadder's question on expenses:

"I've been asked to look at our expenses policy and I think some staff may have fallen foul of the 40% rule.  We have two offices. Usually, each person is assigned a base office and any travel they make to the other offices is reclaimable. 

"I have, however, found that some employers work three days per week in their 'base office' and two days per week permanently in the other office.  Therefore they are spending 40% of their time in one office but reclaiming their travel costs.  The other office doesn't meet the definition of a temporary workplace.

"If I am correct that the expenses are ordinary commuting and not reclaimable who is responsible for the incorrect deduction of PAYE on these costs?"

 You can see Good and Mooney’s answer from around 15 seconds into the video.

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Company profit

Next, Good and Mooney turned their eye on FN Accounting's query on what to do with a large surplus:

"A client (director-shareholder of a limited company) is making a handsome profit but does not need to withdraw the funds, and therefore there is a large surplus left in the accounts.

"I realise it is a nice problem to have but is there an innovative way of distributing this fund to minimise the personal tax?"

The full answer to this question can be viewed from 5m35 into the video below.

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Full video

For the latest episode of TAXtv visit PTP Interactive. TAXtv is a monthly tax update programme available as an annual subscription from £199, (11 issues plus special editions) to view online, download from the internet or watch on DVD.

Replies (2)

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By vstrad
04th Feb 2019 10:33

You haven't answered the second part of Blackadder's question!

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Replying to vstrad:
By raycad
06th Feb 2019 20:43

Fair point but surely the answer is glaringly obvious? The company is paying non-allowable travel costs tax and NI-free which should have been subjected to PAYE/NI. So the company is liable - one might even say culpably liable - to pay the underpaid sums to HMRC. They can hardly argue that they have taken reasonable care etc if the poster him or herself has picked up on it!

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