June Questions and Answers
Newsletter issue - June 2015.
Q. I work as a self-employed air-conditioning engineer, which involves servicing and maintaining air-conditioning units and occasionally fitting new units. I would like to take advantage of the flat rate VAT scheme for small businesses, but I am confused as to what business category to choose. Do you have a suggestion?
A. It is crucial to choose the right business sector when registering for the flat rate scheme, as the sector can't be changed retrospectively. The higher the flat rate percentage (which is determined by the business sector), the more VAT you have to pay over to HMRC each quarter.
If the majority of your income comes from other businesses it would be sensible to choose "business services not listed elsewhere" which carries a flat rate percentage of 12%. If the larger proportion of your income is from individuals then the business category "repairing personal or household goods" may be more appropriate, which carries a flat rate percentage of 10%. You must choose the business category which is appropriate to the largest slice of your income, and review that decision every year on the anniversary of entering into the flat rate scheme.
Q. Following the relaxation of the pension rules in April I took a cash lump sum from my pension scheme but the pension company deducted tax from the payment. I have no other income in this tax year so I shouldn't have to pay any tax. How do I get that tax back?
A. You make a tax refund claim using one of the online forms on the GOV.UK website designed specifically for this situation (form P55, P50Z or P53Z). The form to use depends on whether you have other income or not and whether you have taken out your entire pension pot or not. We can advise you which tax reclaim form is right for your circumstances.
Q. My father employs a care-worker to provide personal care for his disabled wife in their home. The cost is significant, including NIC and PAYE. Is there anything he can do to reduce the cost?
A. People who employ care-workers in their own homes can claim the employment allowance for 2015/16 which is worth up to £2,000 to set against the employer's national insurance contributions (NIC). The allowance wasn't available for such employers in 2014/15 due to the general block on using it against class 1 NIC due on the pay of domestic workers, but the law changed in April 2015.
Your parents may also qualify for state support such as the Attendance Allowance and Disability Living Allowance which are not taxable. If your mother is aged under 65 she may qualify for Personal Independent Payment (PIP).
