December Question and Answer Corner

Newsletter issue - December 2009.

Q. I have acquired a personalised number plate that spells out the name of my business. Can I put it on my business vehicle and claim tax relief for the cost?

A. The Taxman views the cost of a personalised number-plate, over and above what you have to pay to register the car, as an intangible capital asset. Companies can claim a deduction in their accounts for intangible assets acquired since 1 April 2002, but unincorporated businesses cannot. If your business is a company it can write-off the cost of the number plate over a reasonable period, which the Taxman will normally accept to be up to 20 years. If you trade in your own name or as a partnership, your business cannot claim a deduction for the cost, as the number plate does not qualify for capital allowances.

Q. My employer has just paid me a substantial sum described as 'damages' to compensate me for an injury I received at work. Will this payment be taxable?

A. Any payment to compensate for personal injury is not taxable. This applies whether the compensation is paid in one lump sum or as a series of periodic payments. Interest paid as part of the damages award is also tax free but interest paid because of the late payment of the award will be taxable.

Q. Can I set-off the losses from my sole-trader business against my employed income for the year?

A. Yes you can set the losses from your sole-trader business against your earnings from your employment in the same tax year, or in the previous tax year. If you started your sole trader business in the last four years, you can set-off the loss against your other income from the previous three tax years. However, the Taxman will need to be convinced that your sole-trader business is a real commercial business and not just a personal interest that you don't expect to generate a profit from. You will need to submit a personal tax return showing the business turnover, expenses and resulting loss. If your business turnover for tax year 2008/09 is £30,000 or more you will need to provide details on your tax return of the various categories of tax allowable expenses.