June Question and Answer Corner
Newsletter issue - June 08.
Q. I gave a personal guarantee for the overdraft of my property development company. Unfortunately the company went bust and I had to repay the overdraft personally. Can I get any tax relief?
A. It is possible to get tax relief when you are called on to honour a guarantee made for an overdraft of a UK trading company. The amount you had to pay to the bank under the guarantee is treated as a capital loss for the tax year in which you made that payment. This will not reduce your income tax liability, but you can set the loss against capital gains you make in the same year or subsequent tax years. The Taxman may argue that the company was an investment company and was not actively trading to try to deny you the tax relief.
Q. I have just started my own company to provide consultancy services. Can the company pay for me to attend a presentation skills course? Will the cost be taxable on me personally?
A. If you are an employee of your own company, and as the owner/ director you normally will be, the company can pay for any training that is relevant to your work, and claim tax relief for the cost incurred. As you will be required to make presentations as part of you job with the company, then the training is definitely relevant to your work. The cost is not taxable on you. If you had set-up your business as a self-employed consultant the training may not be tax deductible as different rules apply.
Q. For the last few years I've paid into a personal pension scheme but I have never shown those payments on my tax return. Is it too late to get higher rate tax relief for those pension contributions?
A. As a higher rate taxpayer you should enter on your tax return the gross amount of personal pension contributions you paid in the tax year, to claim the additional 18% tax relief available, for the tax years up to and including 2007/08. So for every £78 you paid (equivalent to £100 gross), you should receive tax relief of £18. You are still within time to make a claim for 2006/07. Just write to the tax office where you submitted you tax return saying you are making an amendment to your 2006/07 return and provide details of the gross pension contribution paid. For the years back to 2000/01 you could make so-called error and mistake claim. We can help you with this, but the Taxman is not obliged to accept this special claim.