Expenses for a trading boat

[KevMc]

A quick question to any roving traders who have time to look on here.

 

What boating costs are you allowed to offset against income to calculate net earnings for tax purposes (if you don't bother HMRC then please don't own up to it here - I don't want the nice tax inspectors to spoil your day somewhere down the line).

 

Things I wonder about are:

 

Licence fee .. can you offset the whole trading licence or just the proportion over a standard licence?

 

Fuel .. can you offset all fuel & VAT against income (assuming you register for VAT)

 

Insurance

 

Heating costs?

 

 

 

[zenataomm]

I should think a minefield is ahead.

If you claim the whole of your licence, and they can demonstrate you went somewhere and stopped over but didn't trade (from your log book) then that portion would be none revenue and therefore not claimable.

if you run a road vehicle for business you may only claim for actual mileage driven as part of your business.

 

Likewise if you only claim for the licence % used it would also indicate the same for other running costs.

The jolly chaps/chapesses in HMRC would happily discuss with you their opinion of how much time your boat is your home and what proportion of that cost is a benefit to you.

 

If you rent a corner shop and live above it you can't claim for all of the building's expenses. You'll pay some for business and some for domestic. I can't see a boat that you're sleeping on any different.

 

Oddily, if you live in a house you may plonk a caravan on your drive. However you can't do the same on the ground that is part of your corner shop, even though your paying domestic rates on your flat above.

 

Makes you proud to be British.

Edited August 31, 2016 by zenataomm

[KevMc]

I should think a minefield is ahead.

If you claim the whole of your licence, and they can demonstrate you went somewhere and stopped over but didn't trade (from your log book) then that portion would be none revenue and therefore not claimable.

if you run a road vehicle for business you may only claim for actual mileage driven as part of your business.

 

Likewise if you only claim for the licence % used it would also indicate the same for other running costs.

The jolly chaps/chapesses in HMRC would happily discuss with you their opinion of how much time your boat is your home and what proportion of that cost is a benefit to you.

 

If you rent a corner shop and live above it you can't claim for all of the building's expenses. You'll pay some for business and some for domestic. I can't see a boat that you're sleeping on any different.

 

Oddily, if you live in a house you may plonk a caravan on your drive. However you can't do the same on the ground that is part of your corner shop, even though your paying domestic rates on your flat above.

 

Makes you proud to be British.

 

But say you booked into festivals at different ends of the country ... surely you could charge to travel between them? If you were land based and travelled by van from festival to festival the fuel would be deductible .... but hey ho there's little to be gained in debating what HMRC would or wouldn't allow without asking them.

[zenataomm]

I was answering your first question about licence fee.

 

With a road vehicle you can deduct against Flat Rate accordingly

 

Vehicle

Flat rate per mile with simplified expenses Cars and goods vehicles first 10,000 miles 45p Cars and goods vehicles after 10,000 miles 25p Motorcycles 24p

Then again they may perhaps argue a boat is not a car/goods vehicle or motorbike?

 

There is a more complicated rate, but it seems it falls under capital allowance which I guess means they can then decide to kidnap your first born for organ selling in lieu of capital gains. Should they so wish ....... probably ..... who knows?

[KevMc]

I was answering your first question about licence fee.

 

With a road vehicle you can deduct against Flat Rate accordingly

 

Vehicle

Flat rate per mile with simplified expenses Cars and goods vehicles first 10,000 miles 45p Cars and goods vehicles after 10,000 miles 25p Motorcycles 24p

Then again they may perhaps argue a boat is not a car/goods vehicle or motorbike?

 

There is a more complicated rate, but it seems it falls under capital allowance which I guess means they can then decide to kidnap your first born for organ selling in lieu of capital gains. Should they so wish ....... probably ..... who knows?

It wouldn't surprise me

[Alan de Enfield]

Certainly when using part of your house for business there is a 'no questions asked, no justification needed' formula to be able to offset costs against the business.

 

The 'problem' comes when you sell your house.

 

Lets say that you have claimed 20% of your house / domestic costs is used for business.

CGT is not normally payable on your primary residence, but will be on the 'business' portion.

When you sell you house at a higher price than you paid for it (which is the historical norm) you then have to pay capital gains tax on that 20% (that you claimed was business use) of your gain, so if you sell your house for £100,000 more than you paid for it, CGT will become due on £20,000.

 

 

Speculation :

There may well be a similar 'accepted formula' for using your business asset as partly 'domestic', and possibly the reverse would apply, in that on the sale of the business you could avoid paying CGT on the percentage of the property that was domestic.

 

Speculation :

Maybe you could personally own the boat and rent a proportion of it to the 'company'

You could also charge the company running costs of Xp per mile,

 

You pay all of the 'costs' (diesel, maintenance etc), the company pays you (say) £500 per month for premises rental and £0.50 per mile, the company rightly puts those into the accounts as expenditure (cost of sales)

Edited August 31, 2016 by Alan de Enfield

[ditchcrawler]

All the traders I have spoken to buy all their fuel at the red basic rate not 60/40 or whatever other mortals do.

[Neil Walker]

All the traders I have spoken to buy all their fuel at the red basic rate not 60/40 or whatever other mortals do.

Hurrumph only if you can be assed to argue the toss with some of the yards that will only do their own idea of a cut. Apparently hmrc are on their case?? I trade everywhere so as far as I am concerned everywhere I travel is deductible. I am quite anal about working my living percentage out and there you go! Primary rant over.

[Jrtm]

You could cheat by this im mean legitimate cheat not cheat the system compleatly.

 

So you go to a show on the way you sell 5 bags of coal on diffrent days (business travel expences ect you should be able to claim for) but not living expences e.g. food ect. Now you go to the show sell 2 bags of coal one 1 day but not the other. No problem any travel can be expences.

 

Now my word cheat.

 

You now decide you want to go to a section of canal lets say chester 5 days boating away. You take your signs in so arnt advertising. But you then need a new bag of coal yourself (naturally you would just take a bag) now dont just take a bag sell it to your self for cash and write in your book 1 bag of coal x price you get to chester and while your there on the off chance you sell a bag. All of a sudden the fuel can now all be put on experience as youve traded.

 

If you just went to chester and you didnt sell a bag you couldnt put the trip down legitimately as you sold nothing but again sell yourself a bag on the way and you can now claim it was to sell goods

 

I know people who do it this way and its never been questioned but i know people that have gone from show to show but have traveled in the middle of the shows and not sold anything that cant claim all the travel.

 

My point im making is always write what you sell and the quantity you can always fill in an official book later but if you need your goods put it down as a sale and pay your business direct you can save yourself the cash more in other ways!

Edited August 31, 2016 by billybobbooth

[LoneWolf]

A quick question to any roving traders who have time to look on here.

 

What boating costs are you allowed to offset against income to calculate net earnings for tax purposes (if you don't bother HMRC then please don't own up to it here - I don't want the nice tax inspectors to spoil your day somewhere down the line).

 

Things I wonder about are:

 

Licence fee .. can you offset the whole trading licence or just the proportion over a standard licence?

 

Fuel .. can you offset all fuel & VAT against income (assuming you register for VAT)

 

Insurance

 

Heating costs?

 

 

 

 

The general rule (ie for things not specifically otherwise mentioned in the legislation) is that for an expense to be deductible it must be wholly & exclusively for the purposes of the trade. So any expense with duality of purpose (ie part business part private) is not allowable.

 

Fortunately there is also some case law that says that for expenses with duality of purpose, if the business part can be clearly and separately identified then it would be unreasonable for HMRC to disallow it. So this allows a deduction for some 'mixed' expenses - but only if the business part can be clearly and separately identified.

 

 

 

So whether the expenses you mention would be deductible depends on your circumstances.

eg If your boat was only used for trading (you didnt live on it and never used it for leisure) then you could deduct all the licence fee

If you lived on it then it may be possible to deduct some of the licence fee - but only if the business proportion is clearly identifiable. So in my opinion, you shouldn't have a problem deducting the business uplift you mention but if you wanted to deduct more then you would have to have a method of apportioning it where the business part is calculated on part of the boat that is wholly & exclusively used for business

 

Acceptable methods of apportionment could be floor area eg if you had say a cabin that you only used for the trade then that proportion of the whole licence may be allowable. Or say if you only used it for trade in the day but for personal use in the evenings then you could apportion by area and time - the important thing is that while it is being used for the trade it is only being used for the trade

 

The same principles apply to all the other expenses you mention.

 

Hopefully this makes sense - sadly there isn't an easy answer

[KevMc]

 

Hopefully this makes sense - sadly there isn't an easy answer

Yep - all makes perfect sense .... one hopes it would be as simple in reality

[Tony Brooks]

 

But say you booked into festivals at different ends of the country ... surely you could charge to travel between them? If you were land based and travelled by van from festival to festival the fuel would be deductible .... but hey ho there's little to be gained in debating what HMRC would or wouldn't allow without asking them.

 

When I started running curses at shows for publicity purposes I specifically asked the self employed adviser about what I could legitimately claim for travelling and in the way of subsistence. The adviser appeared unwilling to advise and just parroted the pence per miles for cars thing. When pressed they even told me that if, after the show closed, I went to one of the entertainments I could not anything at all.

 

The same office gave my son a printed sheet that said he could claim up to £300 a year for computer equipment in the one year (that was before the relaxation). I was told that when a student broke something or lost it even a 50p spanner would have to be written down over a number of years.

 

The result was I stopped going by boat and went by car and claimed or hotels which came to a larger amount than going by boat.

 

HMRC seem to have little idea about anything that does not fit their tiny minds.

[Jerra]

 

When I started running curses at shows for publicity purposes

I am siting here trying to work out how curses add to the publicity.

[LoneWolf]

 

When I started running curses at shows for publicity purposes I specifically asked the self employed adviser about what I could legitimately claim for travelling and in the way of subsistence. The adviser appeared unwilling to advise and just parroted the pence per miles for cars thing. When pressed they even told me that if, after the show closed, I went to one of the entertainments I could not anything at all.

 

The same office gave my son a printed sheet that said he could claim up to £300 a year for computer equipment in the one year (that was before the relaxation). I was told that when a student broke something or lost it even a 50p spanner would have to be written down over a number of years.

 

The result was I stopped going by boat and went by car and claimed or hotels which came to a larger amount than going by boat.

 

HMRC seem to have little idea about anything that does not fit their tiny minds.

 

but their advice appears to be correct - see my answer re duality of purpose

 

HMRC's brief isnt to collect the maximum amount of tax as many people think - it is to collect the correct amount of tax

 

or maybe i'm missing your point...?

[Tony Brooks]

 

but their advice appears to be correct - see my answer re duality of purpose

 

HMRC's brief isnt to collect the maximum amount of tax as many people think - it is to collect the correct amount of tax

 

or maybe i'm missing your point...?

 

My point is that it seems to me that in my dealings they are effectively trying to entrap new business owners, especially the self employed, into paying too little tax so fines can be levied and also give very poor advice so such an owner does not know where they are.

 

It gets better, they also told me that if I made a loss I would not get any tax back. This ensured I could not claim everything that an accountant might suggest I could so I ended up buying all my own computer and printing equipment and making no claims for room use, heating, light etc.

 

Then one of their leaflets said that I could not claim accountant's fees whereas my son (same tax office) was told he could.

 

There was much other all but impossible to implement advice about recording phone calls, emails, and web use to apportion costs. When pressed the advisor had to admit that many companies have little idea about this sort of thing although I was expected to..

 

With their draconian powers HMRC need to give far better advice to small start ups because as far as I am concerned they stacked things against me to ensure I always pay too much tax because I fear their powers..

Edited September 1, 2016 by Tony Brooks

[LoneWolf]

 

My point is that it seems to me that in my dealings they are effectively trying to entrap new business owners, especially the self employed, into paying too little tax so fines can be levied and also give very poor advice so such an owner does not know where they are.

 

It gets better, they also told me that if I made a loss I would not get any tax back. This ensured I could not claim everything that an accountant might suggest I could so I ended up buying all my own computer and printing equipment and making no claims for room use, heating, light etc.

 

Then one of their leaflets said that I could not claim accountant's fees whereas my son (same tax office) was told he could.

 

There was much other all but impossible to implement advice about recording phone calls, emails, and web use to apportion costs. When pressed the advisor had to admit that many companies have little idea about this sort of thing although I was expected to..

 

With their draconian powers HMRC need to give far better advice to small start ups because as far as I am concerned they stacked things against me to ensure I always pay too much tax because I fear their powers..

 

Sounds like you had a pretty poor adviser but i dont think they are trying to entrap people into paying too little tax to get fines, morality aside, the maths doesnt add up as they would only enquire into a small proportion of tax returns so most of the people they 'entrapped' in this way would get away with it. Also, if you've received incorrect advice from them leading to an underpayment then this is a valid excuse so you would have to pay the tax but no penalty

 

Hard to comment on the specifics - if you made a loss then you may indeed not get any tax back - that would depend on if you had other taxable income eligible to absorb any of the losses. I'm surprised they produced a leaflet saying accountants fees are not deductible, but then some accountants fees aren't deductible - it depends what the accountant was advising about

 

I thoroughly agree with your last paragraph. They are getting better at advising new businesses though - how recently was your advice?

Also, as demonstrated by Kev's question, there often isnt a simple answer to "can i claim for this?" - especially for small start ups where a lot of expenses will have duality of purpose

 

Can i ask why you just didnt get an accountant to do your return?

[Gareth E]

Lots of good stuff on this thread. Now; a more practical view of this:

 

There has been a large increase in the number of self employed people in recent years. At the same time; the number of HMRC employees has fallen. So tiny is the number of staff that they can't possibly spend time looking over every detail of a small trader's business. They tend to limit their activity with this group as follows:

 

1/ Compare the trader's declared profit with the average within that sector.

 

2/ Periodically, telephone the trader and ask a number of fixed questions. If a number of the answers given raises an alarm they may select this trader to closer attention. For example they might ask "do you regularly buy materials, paying in cash?". An answer of "yes" might raise an alarm.

 

If a trader were investigated and he/ she had claimed a few quid more in expenses than they should have this would not result in the 'offender' being prosecuted. This is simply too costly and as mentioned previously, there aren't enough staff. He or she would likely be billed for the extra tax due and possibly, depending on HMRC's view on how naughty he or she had been, a penalty on top.

 

HMRC spend their limited resources attempting to bring in as much tax as possible. Common sense dictates that they will spend most of their time pursuing larger amounts, rather than smaller ones.

 

Make of this what you will.

[Jerra]

HMRC spend their limited resources attempting to bring in as much tax as possible.

It would appear that you and Lone Wolf are at odds as to what HMRC do. She in #14 thinks they are trying to get the correct amount of tax.

[LoneWolf]

It would appear that you and Lone Wolf are at odds as to what HMRC do. She in #14 thinks they are trying to get the correct amount of tax.

 

I think you need to re read what we both said taking the context into account

 

I said their brief is to collect the correct amount of tax (as opposed to entrapping people into under/over paying) which is true

 

Gareth says they spend their limited resources collecting as much tax as they can. which is also true - they try and collect as much of the correct amount of tax as they can

They dont phone traders up periodically asking questions about paying in cash though as far as i'm aware and if they ever do the correct response is to tell them to put their enquiries in writing

[Gareth E]

 

 

 

I think you need to re read what we both said taking the context into account

 

I said their brief is to collect the correct amount of tax (as opposed to entrapping people into under/over paying) which is true

 

Gareth says they spend their limited resources collecting as much tax as they can. which is also true - they try and collect as much of the correct amount of tax as they can

They dont phone traders up periodically asking questions about paying in cash though as far as i'm aware and if they ever do the correct response is to tell them to put their enquiries in writing

 

2 friends of mine received calls with identical questions. Both are decorators.

[zenataomm]

I have a member of my family who is a senior tax inspector.

They work and are measured against KPIs. They have targets to meet financially.

 

What do you think is their directive?

[LoneWolf]

 

 

2 friends of mine received calls with identical questions. Both are decorators.

 

Then they should ask for the questions to be put in writing. HMRC are not supposed to call up out of the blue and ask open and leading questions like "do you pay for things in cash"

They either open an enquiry or they accept the return.

 

have a read of this

http://taxaid.org.uk/guides/taxpayers/tax-returns/enquiries

 

Know your rights!

 

Having said that, they do have task forces that concentrate on different sectors eg decorators or landlords etc at a time but their massive computer hoovers up all the data it can (land registry, dvla, social media, insurance etc) and picks the people for them. Then they send them a letter suggesting they may wish to revisit their tax and if that doesn't work they open an enquiry.

They dont call people up for this type of targeted thing either though

I have a member of my family who is a senior tax inspector.

They work and are measured against KPIs. They have targets to meet financially.

 

What do you think is their directive?

 

the computer tells them what to do

 

then the top geezas make sweetheart deals with megacorps and get a nice juicy job when they've done their time at hmrc

 

i'm fairly sure thats how it goes

[frahkn]

 

 

then the top geezas make sweetheart deals with megacorps and get a nice juicy job when they've done their time at hmrc

 

i'm fairly sure thats how it goes

 

I know that it sometimes looks very much like that.

 

But it really isn't, honestly, take my word.

 

Frank.