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Any Answers Answered: Property companies and fees to an employer

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TAXtv’s Giles Mooney and Tim Good are here to tackle two questions from the pages of Any Answers, this time on associated company rules and fees paid by an employee to an employer.

12th May 2023
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To view the full questions and AccountingWEB readers’ answers click on the links below.

Property companies and the associated company rules

Our first question came from VCM Accountants who asked about the associated company rules: “I have a number of clients that run businesses through a limited company and they also may hold a buy-to-let property in a limited company. I can see from the legislation that we can ignore companies that have not carried on a business, but I’m just wondering if a property company holding residential buy-to-lets would be treated as carrying on a trade.”

Tax deductibility on fees paid to an employer on leaving

The next question came from Peter Harding who asked: “An employee who recently left her firm was obliged to pay back several thousand pounds relating to training costs that her employer had incurred for her training while she worked at that company. The deal was that if she left within two years of such training she had to pay the amount back to her employer, which is what happened. Is it possible that she can claim this cost as a tax deduction? Should it come off her gross taxable salary for the year so that she can get an income tax rebate?”

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

Replies (3)

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By Hugo Fair
12th May 2023 17:41

Regarding the 2nd case in this podcast ...

As I understood it, what was decided in favour of the taxpayer in HMRC v J Martin [2014] UKUT 0429 related to repayment (by employee) of earnings (previously paid by employer to employee).

Whereas (again as I understand it) the cited Any Answers question was based on payment (not repayment of previous earnings) by employee for breaking a contractual term - not dissimilar to reimbursing the employer for wilful damage to company property.

Unless I'm missing something fundamental (always possible) those two scenarios share as few characteristics as do chalk and cheese?

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Replying to Hugo Fair:
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By richard thomas
17th May 2023 07:21

The comparison should be between chalk and a very unripe Brie.

I agree with Tim Good, and a reading of Warren J’s typically closely argued and nuanced decision in the UT (and Howard Nowlan’s in the FTT) suggests that any contractual payment related to the employment would be NE, with only a Henley v Murray total abrogation being on the wrong side of the line.

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By Paul Crowley
19th May 2023 16:16

As always much appreciated

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