Reply to: Sell car to Ltd company

[MrMarkyMark]

Bottom line could just come down to your appetite for risk. Are a few months extra expenses worth the potential fall out if HMRC disagree and win.

This, for me

[pr1]

So first off we need a definition of 'know' and that will vary between our opinion and HMRC's. To be honest often we will know well before official documentation comes out. The request for my extension in January is already in and they have little choice but to renew so I know already. Do I stop claiming now? (doesn't put me over 24 months btw. Just hypothetical). I could easily argue the contract could fall over so I don't completely know until I've signed the contract. My contract is with the agent anyway so the client telling me is very ambiguous. There is also no evidence proving I know as well so going to be hard for HMRC to argue.

Realistically speak HMRC can only go back as far at they can evidence but this still is still arguable. An email from a client saying we intend to renew could be construed as knowing but again it could fall over at the last minute. The offer letter from the agent would be the first completely official point you can't argue you know but I am sure HMRC would consider the first email from the client saying you are going to be there is good enough i.e. You know you are expected to be there barring any failures. I would be inclined to think this is the point you have to stop claiming. If the client tells you two months before then you've just been fk'd over and have to stop then. If the client tells you 2 days before then you've had two months of expenses you wouldn't have had in the previous example.

I also think you have to transpose 'Know' with 'expect' for the 12 months but binned after 3 situation. You are contracted to be there for 12 so that counts i.e. you expect to be there for 12 so that will be good enough.

Very very grey area and I am sure it's never been tested in court. Bottom line could just come down to your appetite for risk. Are a few months extra expenses worth the potential fall out if HMRC disagree and win. Personally I keep it fairly clean but unless you intend to push the line almost to tax evasion I don't think you should lose too much sleep over it.

I'd argue that your "expectation" should only be as long as the notice period on the contract you're in

I agree with the subjectivity/greyness of it - Therefore imo the worst case is that you end up having to pay the tax back for the (say) 9 months you "shouldn't" have been claiming (they wouldn't be able to enforce penalties on it) - in which case you're only in the same position as you would have been if you didn't risk it in the first place

therefore - you should just claim up to the 24 months (as I'm sure we all do...)

[northernladuk]

I've seen a lot of people quote this (inc nluk, cojak), and I suppose it is in the rules if you follow them to the letter, but has there ever been a case where under audit a contractor had to pay back the tax from the point they "knew" they would be working, such as the example you mention above?

you might sign that 12 months extension but they might then let you go after 3 months - what's the definition of "know" in this context?

So first off we need a definition of 'know' and that will vary between our opinion and HMRC's. To be honest often we will know well before official documentation comes out. The request for my extension in January is already in and they have little choice but to renew so I know already. Do I stop claiming now? (doesn't put me over 24 months btw. Just hypothetical). I could easily argue the contract could fall over so I don't completely know until I've signed the contract. My contract is with the agent anyway so the client telling me is very ambiguous. There is also no evidence proving I know as well so going to be hard for HMRC to argue.

Realistically speak HMRC can only go back as far at they can evidence but this still is still arguable. An email from a client saying we intend to renew could be construed as knowing but again it could fall over at the last minute. The offer letter from the agent would be the first completely official point you can't argue you know but I am sure HMRC would consider the first email from the client saying you are going to be there is good enough i.e. You know you are expected to be there barring any failures. I would be inclined to think this is the point you have to stop claiming. If the client tells you two months before then you've just been fk'd over and have to stop then. If the client tells you 2 days before then you've had two months of expenses you wouldn't have had in the previous example.

I also think you have to transpose 'Know' with 'expect' for the 12 months but binned after 3 situation. You are contracted to be there for 12 so that counts i.e. you expect to be there for 12 so that will be good enough.

Very very grey area and I am sure it's never been tested in court. Bottom line could just come down to your appetite for risk. Are a few months extra expenses worth the potential fall out if HMRC disagree and win. Personally I keep it fairly clean but unless you intend to push the line almost to tax evasion I don't think you should lose too much sleep over it.

[b0redom]

I think proving intent would be difficult. You could sign a 24 month (and 1 day) contract whilst knowing that you weren't going to see it out, and terminate it at 23 months (assuming the clauses were in the contract). Plenty of posters here advocate leaving early if they get a better offer (money/wfh/commute etc).

[kyber]

I don't know of any such case but would be a shame to expose oneself to the risk through not being careful in correspondence and on contract dates.

[MrMarkyMark]

you might sign that 12 months extension but they might then let you go after 3 months - what's the definition of "know" in this context?

I believe its more based on the intention of being somewhere for 12 months.
It will be good to hear others views, however.

[pr1]

Not after two years but as soon as you know you will be working in the same area for two years... So signing a contract extension of 12 months that takes you one day over two years means you know and therefore your expenses become subject to tax (rather than ceasing) immediately.

I've seen a lot of people quote this (inc nluk, cojak), and I suppose it is in the rules if you follow them to the letter, but has there ever been a case where under audit a contractor had to pay back the tax from the point they "knew" they would be working, such as the example you mention above?

you might sign that 12 months extension but they might then let you go after 3 months - what's the definition of "know" in this context?

[kyber]

didn't even realise I needed to stop claiming expenses after 2 years. I should probably change them!

Not after two years but as soon as you know you will be working in the same area for two years... So signing a contract extension of 12 months that takes you one day over two years means you know and therefore your expenses become subject to tax (rather than ceasing) immediately.

[Andrew@Wisteria]

Efficient. FTFY!!

Lol. Still an improvement.

[stek]

This. NB all cars are normally not worth putting into company unless they're ultra effficient. Ps. hope your accountant has a few less typos

Efficient. FTFY!!

[TheFaQQer]

If I'm paying a professional though, I expect a professional service not just a monthly invoice.

Ring InTouch and tell Louisa that I sent you their way

[mudskipper]

Get a new one then.

WHS.

[northernladuk]

If I'm paying a professional though, I expect a professional service not just a monthly invoice.

Get a new one then.

[lenovo]

You run your company NOT your accountant.

It's not hard to find the relevant tax information you need as a company owner. Firstly lots of accountants, associations like IPSE and even this site have free online guides to help. Secondly HMRC provide the necessary pages online with more information, which you can find through Google. Also HMRC are "very kind" and provide things such as VAT courses to help small business owners.....

If I'm paying a professional though, I expect a professional service not just a monthly invoice.

[SueEllen]

OK thanks guys, looks like I won't be doing it then. I generally avoid my accountants, seem to be a bit of a waste of space, didn't even realise I needed to stop claiming expenses after 2 years. I should probably change them!

You run your company NOT your accountant.

It's not hard to find the relevant tax information you need as a company owner. Firstly lots of accountants, associations like IPSE and even this site have free online guides to help. Secondly HMRC provide the necessary pages online with more information, which you can find through Google. Also HMRC are "very kind" and provide things such as VAT courses to help small business owners.....