If you want Christmas gifts to be tax deductible as an expense, the value should be no more than £50 (per recipient) and be promotional in nature (i.e. the gift itself should bear your branding, not just the packaging or wrapping).

Unless you sell them, such gifts should not be alcohol, food, drink or vouchers that can be exchanged for these. If gifts aren’t seen as promotional or they’re worth more than £50, they will be classed as entertaining, so they will not be tax deductible. And if the gift is worth more than £50, HMRC will disallow the full cost, not just the amount over £50. If in doubt, as with all tax matters, seek advice from your accountant.

Getting paid is one of the most important things in business, here are a few pointers to ensure that you are paid on time.

If you don't have an automated solution, a well-formatted invoice can make the difference to ensure you get paid quickly avoiding complication from incomplete or unclear information.

A well-designed invoice will send a good impression to your clients and customers. A page with errors and unclear layout can make you appear unprofessional and is something to avoid.

What should be included in an invoice?

A standard (non-VAT) invoice must include:

1. ‘Invoice’

The document should show the  word ‘invoice’ to differentiate it from a quote, credit note or receipt.

2. A unique invoice number

The number must be unique to each invoice (without duplicates) for clear identification and you must keep a record of the numbers and references used. Using a sequential numbering system is the easiest way to manage this. The reference can contain letters as well as numbers.

3. Your company name and address

This can be different for sole traders and limited companies, but you must show clearly your trading name, business address and also, where you can be contacted by the customer, in case of query or dispute.

4. The company name and address of the customer

This is standard procedure on all invoices (except simplified VAT invoices) but is important for customers who want to claim back any VAT that has been charged.

5. A description of the goods/services

A clear description of the goods and services being invoiced for, with each service or item on a separate line.

6. The date of supply

Known as the ‘supply date’, this is when the goods or services were issued. The supply date may be different to the invoice date but is usually within 30 days.

7. The date of the invoice

Date of when the invoice was generated and not when the goods were supplied.

8. The amount of the individual goods or services to be paid

If you have a list of items in the description, then each one should be marked with an individual amount.

9. The total amount payable

The total of all goods listed on the invoice.

You should also include:

10. Payment terms

Usually defined in your Terms and Conditions and agreed by your customer. These are your terms for the length of time to pay and should be marked at the bottom of the invoice. 

11. Purchase order number

If your customer provides you with a purchase order number, then this should be clearly shown on the invoice. Some customers may also require that the name of the contact person is shown on the invoice.

Asking for a purchase order is recommended as once generated this is a legally binding contract between yourself and your client/customer.

12. How to pay the invoice

List the different ways that an invoice can be paid and include the bank account references. 

Both an individual Sole Trader (self-employed), and a Director of a limited company are able to claim expenses related to using their home as an office, however the rules surrounding this are different in each case and can be complex.

A Sole Trader

There are two methods for claiming expenses related to working from home:

1.      Specific calculation:

You are able to claim a proportion of your costs for things like:

·        heating

·        electricity

·        Council Tax

·        mortgage interest or rent

The method used by HMRC is to calculate the number of rooms (based on living spaces) you use for business and the amount of time you spend using that room. You then take this as a proportion of your costs.

Example as per HMRC:

You have 4 rooms in your home, one of which you use only as an office.

Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4).

If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).

2.      Simplified Method

Based on the table below you can claim a flat rate per month based on the number of hours that you are working from home each month. These rates do not include telephone or internet costs, and you can claim the business proportion of these bills separately by working out the business proportion of the bill.

Hours of business use per month                                          Flat rate per month

25 to 50                                                                                  £10

51 to 100                                                                                 £18

101 and more                                                                          £26

To claim this amount, you must undertake substantive duties related to the main trade of your business and the business activity must be undertaken from your home. You cannot simply sort your business post at home and/or work at a client’s premises.  

A Director of a Limited Company

1.      Simplified Method

This is similar to that of a sole trader, but stingier!! HMRC will allow a flat rate of £4 a week without the need to maintain receipts or bills. You simply need to make a claim through expenses.

This method is simple to operate and the allowance does not need including on self assessment tax returns but often will not reflect the true costs incurred by those working from home on a regular or permanent basis.

2.      Claiming Actual expenses

This is calculated in the same way as above, but can only be claimed on incremental costs.

A few considerations to think about:

Sounds simple, but there are a few complex considerations to take into account when claiming for these household expenses:

·        Directors of a limited company can’t claim against fixed costs (things like mortgage payments, home insurance, council tax, and the fixed element of utility)

·        If you sell your house after making your expense claim, it’s possible you’ll be hit by capital gains tax on your 25% gain.

·        If you also use your home office as a guest room, you would avoid the capital gains tax, but would also see a reduction in the household costs you could claim.

3.      Renting Space to the Company

There is an additional option whereby the homeowner charges a rental price for the use of the office, however this is particularly complex as a market rate needs to be determined, and affects both the company tax return and the individuals self-assessment, which can be further complicated if the home is jointly owned.

For any further information or help with claiming these expenses please contact me.

An area that HMRC seem to be paying close attention to at the moment is how rental income is divided between spouses. The rules apply that if income is received from a jointly owned property, then the income should be split 50/50 under s836 ITA 2007. It is however possible to alter this under s837 if: 

• a joint election is made (on Form 17); and
• spouses are beneficially entitled to unequal shares of the income.

Form 17 requires proof of point 2. You are able to own property in two ways; joint tenants where the split is 50/50, or tenants in common where the ownership can be unequal, and allows for specific distribution of the owned share of the property through an individuals will - paperwork from the land registry needs to be completed in order to change the tenancy type.

HMRC states that where the joint owners are husband and wife, or civil partners profits and losses should be shared equally, unless:

• both entitlement to the income and the property are in unequal shares, and
• both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

As the end of the tax year is drawing near here are a few strategies that can be considered in order to maximise wealth.

ISA’s – the maximum annual ISA allowances which can be invested is £20,000. 

LISA’s – A Lifetime ISA can be used either for buying your first home, or for using in retirement. You must be aged between 18-40, and you can invest up to a maximum of £4,000, and the government will add a 25% bonus, plus annual interest.

Junior ISA’s – Up to £4,128 can be invested on behalf of someone aged 18 and under.

Gifts – You can utilise your annual exemption for gifts of up to £3,000, and bring forward last years allowance also if this was not used. A total of £6,000, which could save £2,400 Inheritance Tax. Other options include a parent giving a gift for a marriage of up to £5,000, with a grandparent being able to give £2,500. 

Dividends - As a limited company be sure to pay out £5,000 if profits allow. the tax free allowance is reducing to £2,000 this year.

Please consider the above for your thoughts only, and not as advice. Circumstances differ and advice from a qualified professional would need to be sought in all individual circumstances.

Do you want to claim up to £230 tax back per year - and also claim for previous years?

Do you earn less than £11,500. Does your husband, wife, or civil partner earn between £11,500 & £45,000?

Please contact me to find out how I could help you claim these monies.

Love this. The FTT found in favour of HMRC that Nestle's banana & strawberry flavoured milkshake should attract VAT whilst the chocolate flavour may continue to be zero rated as it contains cocoa butter - a food which itself is zero rated. Nestle's argument that all of their milkshakes encourage drinking milk which is a zero rated product didn't have enough sway. Nestle losing it's appeal leaves them with a £4m tax bill. Other anomalies in the VAT system include the fact that fruit salad is zero rated while smoothies made from fruit are standard rated, and chocolate cake is zero rated while chocolate biscuits are standard rated.