July Question and Answer Corner

Newsletter issue - July 07.

Q. I'm a driving instructor and operate through a limited company. The Taxman wants to tax me for using my instruction car and fuel as a taxable car benefit. I don't think that's fair as the car is necessary for my business. Is he right?

A. Essentially the Taxman is correct. If you use the instruction car for even one mile of a private journey, there will be an income tax charge. It is irrelevant whether the car is necessary for your business or not. Taxi drivers who run their businesses through limited companies have the same problem. If you can show that you make absolutely no personal use of the instruction car, perhaps because you use another car for all private journeys, the Taxman may be persuaded to treat the instruction vehicle as purely business. However, he may want to see an insurance policy that prohibits private use.

Q. My company has recently applied for gross payment status under the new CIS, but the application was rejected as the Taxman says my personal income tax was paid late for 2005/06. I sent the tax payment on 24 January 2007, so how can this have been late?

A. This is a problem with the new CIS computer system, as one late payment of income tax should not make your application for gross payment fail. The tax office also should have received your cheque before 31 January 2007, the deadline for that payment. Unfortunately your only option now is to appeal against the decision, although in this case the Taxman appears to be completely in the wrong.

Q. My husband has been seconded to the Dubai office of his company for six months, but I won't be joining him, as we don't want to disrupt our children's schooling. Do I need to tell the Taxman?

A. If you are claiming tax credits you do need to tell the Tax Credit Office as soon as possible. You will be counted as a single parent while your husband is away and your tax credits claim needs to be reassessed.