Connected persons

MickKnipfler

Does anybody know what the connected persons tax issues are?

I have my own Ltd Co and work away from home a lot. Currently I use a personally owned motorhome for this. I only claim the mileage at 40/25p per mile (which at 20mpg means I make a loss) for this. I'm taking all the depreciation etc personally as well as pating tax, insurance etc.

I did speak to my accountant about the possibility of my partner buying a caravan and renting it to the business. They advise against it under "connected persons" rules. I can understand their being issues if it's just a hidden way of paying my partner a salary. However, if sh buys the caravan herself and rents it to the business at market rate and declares the income as a sole trader, why is this an issue?

Bean_Counter

Why doesn't your accountant advise you to claim the actual costs of the business trip if you are making a loss at 40p per mile. The 40p per mile is only there for simplicity.

MickKnipfler

jimmo wrote: »

Answer: because it is not an option.
If you have your own Ltd Co you are not self-employed. You are a director of the company and subject to employment rules where you can only claim 40ppm.

Spot on....anybody know about the "connected persons" issues?

noh

jimmo wrote: »

Answer: because it is not an option.
If you have your own Ltd Co you are not self-employed. You are a director of the company and subject to employment rules where you can only claim 40ppm.

Thats not true. You can claim/be paid as much as you like. The first 40p will be tax free any excess subject to tax.

Nigel

MickKnipfler

noh wrote: »

Thats not true. You can claim/be paid as much as you like. The first 40p will be tax free any excess subject to tax.

Nigel

OK true.....but then I may just as well take it as salary


Does anybody know about the connected persons issue?

MickKnipfler

Thanks Jimmo,

The situation is that currently, I use a privately owned motorhome and I'm personally taking all the hit in terms of wear & tear, depreciation and running costs out of taxed income. I'm looking for a more tax efficient solution.

As my partner only works about 10 hours a week, she doesn't use up all her 22% tax band. I saw this as a possible solution (as long as it was above board and legal).

I did also suggest the company buying a caravan but the accountant advises against that too unless I wanted to attract a BIK liability of 20% of the cost each year

MickKnipfler

Thanks again Jimmo.

I'm not trying to do anything illegal, just try to find a "tax optimised" solution.

My partner is company secretary but not an employee or director as I make 100% of the turnover and Hector says paying partners under those circumstances is a no no. My last accountant said I could pay her £400pm but new accountant says not to.

Where I was coming from is that I could legitimately lease a caravan from fred blogs & co at market rate so I thought doing the same from my parter wouldn't be any different especially if it was at a rate slightly below those commercially available. Happy if experts such as yourself think otherwose though.

At the ed of the day, there must be something more tax efficient than using a privately owned facility for free!

MickKnipfler

I was considering changing for a caravan anyway because that may give me a valid justification for having a pick-up truck. I like on a small holding anyway so could make decent use for this anyway.

Would the best way then just for the company to buy the caravan? The issue is though, I wouldn't want to get caught for 20% BIK just to use it for 2 weeks a year (Or would the BIK be apportioned if I only used it privately for 4% of the time?)

Murdina

don't overlook in any arrangements with your partner the new rules which are proposed for taxation of income in "family" companies published last week. Your accountant is hopefully fully aware of these too now.

MickKnipfler

Thanks again....I did email the accountant again on Friday....no reply yet

MickKnipfler

Jimmo, I think a double cab is OK as long as it has a payload of 1 tonne or more. Dunno how long for though