January Question and Answer Section
Newsletter issue - January 2014
Q. I have four rental properties, and I have recently remortgaged one property to provide funds for my son's education. Can I set the professional fees and charges connected with this re-mortgage against my letting income?
A. Normally fees connected with obtaining finance for a business (including a lettings business) are allowable against the profits of that business, but in this case you didn't use the additional funds for the purposes of the business, but extracted them for your own use. Therefore the fees and charges connected with the new mortgage can't be set against your letting income.
Q. I've got into a muddle over childcare vouchers. When I started the voucher scheme in 2012 all my employees were taxed at 20%, so they all received vouchers worth £55 per week. Now some are paying tax at 40%, but they are still all getting the full amount of tax-free vouchers. What should I do?
A. As an employer you are required to review all your employees' relevant earnings at the beginning of the tax year, and adjust the amount of tax free childcare vouchers for any employees who are expected to fall into the higher tax brackets. If at the time of that review it was not foreseen that some employees would be paying tax at 40% at some point later in the year, you are not required to adjust the amount of tax free childcare vouchers. The level of tax relief for the vouchers is set at the beginning of the tax year, or when the employee takes up employment with you in that year.
If your review of relevant earnings in April 2013 was incorrect, you may have given vouchers in excess of the tax free amount to some employees. In those cases the excess amounts should be reported on the P11D forms for those employees.
Q. All my employees are entitled to a bonus for exceeding performance targets in 2013, including those who left before the end of the year. How should I report the bonus due to the former employees to HMRC, and do I have to deduct tax?
A. Under RTI you need to set the 'payment after leaving' indicator on the full payment submission (FPS) that includes the bonus payment to your former employees. Also on that FPS use the same payroll ID for that person as applied while they were an employee, and show the date the employee actually left. The year to date figures on the FPS should include the bonus payment as well as the previous pay and deductions for the former employee. When paying the bonus to a former employee you need to use the PAYE code 'OT' on a month 1 basis to deduct tax and NICs.