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August Questions and Answers

Q. I have prepared my 2022 tax return for submission but on reviewing previous returns I found that I made an error when completing the 2018/19 tax return, resulting in an overpayment of tax. Can I get my money back?

A: The self-assessment rules limit the time you have to claim tax relief. As an individual or company the time limit for submitting an amended return is usually one year from the deadline for submitting the return you want to amend. So to amend the 2020/2021 return, for example, you have until 31 January 2023. It is too late for the 2018/19 return to be amended but a claim can be made for ‘overpayment relief’.

Except where legislation specifies to the contrary, the general rule is that relief must be claimed within four years from the end of the tax year to which the claim relates for personal taxes, and four years from the end of the accounting period for corporation tax. Therefore so long as this claim for the year 2018/19 reaches HMRC by 5 April 2023 you can claim. The claim must be in writing.

Q. I am the director of my company and one of my employees is getting married next month. I want to pay for the cost of the honeymoon night and taxi that they will use to travel to the airport. The company has an account with a local taxi business. Are there any tax implications for the employee and can the company claim tax relief?

A: Generally, any gifts made by a business to an employee are taxable as benefits in kind unless covered by a specific exemption (or are a ‘trivial benefit’). This is the case even though the reason for the gift is not business related (as in this instance). The reason being that where there is an employer-employee connection, the gift is employment-related even if the reason for the gift is a private one.

Where a benefit in kind is charged then the company will be able to claim tax relief on the cost to the business.

Q. A couple of years ago I self-built a bungalow in my back garden intending to sell on the open market but since then my son and daughter in law have split up so I am now looking to sell the property to him but at a lower than market value. The bungalow cost overall £280,000 and is now valued at £520,000. My son can only afford to pay me £375,000. What are the capital gains tax (CGT) implications?

A: When you gift an asset to anyone, or when you transfer an asset to a connected person (e.g., a son – as in this case), for CGT purposes the asset is deemed to go across at present market value. The amount actually paid is ignored. Therefore, since the property is currently worth £520,000, and it cost £280,000, there is a capital gain of £240,000. However, there may be a value to allocate for the actual land underneath the property being transferred which may be included in the calculation.

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