Tax Guru 11-2012

Hello again!

My name is Andrew Richardson and I have been running TaxAssist Accountants in Elgin for five years. I am hoping that this tax advice section will become an interactive feature. Submit your tax and accountancy questions to Moray Life and I’ll answer a sample of them each month, along with a brief summary of the tax issues we should be looking out for.


Q: I have just started my own company and my wife and I are the only directors. Do we need to pay ourselves minimum wage?

A: Because you are a director, you are viewed as an 'office holder' in the eyes of HMRC. Therefore, you are not entitled to receive the National Minimum Wage (NMW) - unless you provide your services to your company under contract.

On the assumption that your company has not issued you with an employment contract, the answer is no, the company is not required to pay you a minimum wage.

Q: I just got a letter from HM Revenue & Customs telling me that I need to file my tax return by the 31st of October. I don't have everything ready yet and I don't think I can file in time. Is there a way I can avoid getting a late filing fee?

A: The filing deadline at the end of October only applies to those taxpayers who complete and submit a paper tax return. You have the alternative to file your tax returns online. The deadline for returns that are submitted online is the 31st of January 2013.

But it is good practice to complete your tax return as early as possible. Not leaving it until the last minute should avoid mistakes from being made and allow you to consider any tax planning opportunities available.

Furthermore, you will know what your tax liability is ahead of the due date of 31st January 2013, and therefore have more time to put some money aside. Filing your tax return early, whether electronically or in a hard copy, does not accelerate the due date for the tax either.

Q: I work in a hairdressers and I heard that there was going to be some kind of change to renting out a chair. Can you tell me if that's true and if so, what it is?

A: This is likely to be about the treatment of VAT in regards to rental chairs.

Technically speaking, there is no change. But HM Revenue & Customs (HMRC) became aware that their guidance was being misunderstood, so they have clarified their position.

From the 1st of October, if the salon you rent your chair from is VAT registered, they will have to charge you VAT on top of the rent. So it is likely that 20% (the current rate of VAT) will be added to their chair rental cost from now on.

The only probable instance where VAT won't be charged is if you rent an entire floor or room from the salon. You would need to control who enters the area you occupy, and make sure that the salon does not provide you with other services such as laundry, a reception area, etc.

If you are not VAT registered, and you have been renting a chair from a salon that is VAT registered, then you cannot recover the VAT charged to you by the salon, and it will become an additional cost to your business. You may have to look at increasing your prices to your customers to maintain the same levels of profit as before.

If you have a tax query then please submit your questions to Moray Life and I'll try to give a response next month. And always remember...

'Never invest in anything that eats or needs repairing.'

By Andrew Richardson

TaxAssist Accountants Moray

Andrew’s contact details:

Please see my TaxAssist page for more details.