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August Question and Answer Corner

Newsletter issue - August 09.

Q. The interest rates available on personal deposit accounts are much higher than those for business deposit accounts. Can I withdraw money from my company's account and deposit it in an account in my name, on the understanding that I hold the funds as an agent for the company? All the interest would be declared as the company's income rather than my own.

A. The Taxman accepts this plan works if there is a trust deed in place which gives the company a legal right to the funds. However, will you be completely open with the bank when opening the deposit account in your name? If you declare you hold the funds as agent for the company you may not get the higher interest rate you seek, as the bank will view the account as a commercial rather than a private account.

Q. My company requires certain employees to attend trade shows in other countries. The company pays for all the travel costs including visas where necessary, and the employee's passport, if one is not already held. Can the company claim the cost of the passport as well as the cost of the visas as a business expense?

A. Where the visa can specifically be linked to the requirement to attend the trade show it is a valid business expense for your company. If the employee makes no other personal trips in the country where the trade show is held there is no significant personal element for the employee, so there is no benefit in kind tax charge for the employee. The employee's passport will last for 10 years, so the business element of the trip to the trade show will be tiny. Where the company pays for the passport it will be a benefit in kind for the employee that needs to be reported on the form P11D. However, if the terms of the employment require the employee to hold a passport the company can claim the cost of obtaining the passport as a business expense.

Q. I recently formed a new company which will take over the business I run in my sole name. The formation agent charged VAT on their invoice. Can my new company reclaim that VAT?

A. Yes, the company can reclaim the VAT in its first VAT return as long as it becomes VAT registered within six months of the formation of the company.

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