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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13775
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Advice on minimising tax liability in first year of trading.

Resolved Question:

Advice on minimising tax liability in first year of trading. Limited company.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question - I am Sam and I am one of the Uk tax experts here on Just Answer.

Please advise

1) How many clients do you have in London that you work for

2) How much work do you actually undertake at home in North Wales, and do you actually ahve a room set aside just for work purposes and also does the same apply for the lost in London - do you stay there when up in London?

3) Do you draw a salary - and pay tax on this salary (run a payroll and have tax deducted from your pay each week/month)

Thanks

Sam

Customer: replied 2 years ago.

Hi Sam,

Thank you very much for responding to my question.

For the last 12 months I have been working via a freelance website as a CAD technician. Since January '15 I have become Limited.

I have not taken a salary at any time as such but just used funds as I have needed them. Please advice if there is a advantage in drawing a salary.

In Wales I have my family home and I have also converted an outbuilding to a dedicated Studio.

In London I have a house which I rent out (About £25,000/yr rental income) but I keep the loft and use that as my 'base' in London as a Studio and to sleep. (For example I am currently in London working

for 3 separate clients and have been here since Monday and intend to go back Sunday once all outstanding work has been finished.)

When, God willing, I return to Wales I will then again work from the studio there.

My clients are all in London so I have to have the use of the Loft.

A lot of my work can be done 'remotely' hence I hope to be able to work from home studio next week.

Expert:  Sam replied 2 years ago.

Hi Rushtom

First the funds you have drawn when you needed them constitute a salary (since you have become a limited company) prior to that a a sole tarder, then this make no difference as you wre then charged tax on income less expenses.

But you do need address the fact that this drawings you now make should be subject to tax and national insurance, and you cannot simply just draw out funds when you wish. Did you not take advise on how to run the limited compay at the time you commenced trading this way?

These three clients in Lonndon - are these short term clients (so you are in London this time for work you undertake for them- but last time you were in London it was for other clients) - expand on why you would need to be in London when you then go on to advsie that a lot of your work can be done remotely -

Did this also reflect the way you worked as a CAD techician on the freelance website

I am trying to establish your pattern of work wioth specific clients, and whether you work for the same clients month in and month out, so it turn I can establish whetehr these are genuine business expenses.

Would there be any other reason that you come to London other than for the cleints and the work that needs to be undertaken face to face.

I look forward to a response

Thanks

Sam

Customer: replied 2 years ago.

In terms of clients. I visit London to survey property before producing drawings. I meet new clients and get a briefing. (e.g this afternon I had a meeting with a Design Studio who agreed with me to produce plans for a coffee shop. Without the Studio in London I would not get most of the work. This week I have worked three days for a Restaurant chain in NW London. Also I have worked this week from the Loft studio on drawings for a new Client on redrawing some plans for the Managing Agents.

None of the jobs are large sums of money but I wouldn't get the work without being in London. I will of course take work back to Wales. as much as possible as life is much easier and pleasanter.()If there's such a word)

Basically the Freelance website introduces me to the new clients.

I will pay a small percentage to them for the introduction.

No there are no other reasons for coming to london. apart from the occasional maintenance on the property but that is managed mainly through a homecare agreement.

Expert:  Sam replied 2 years ago.

Hi Rushton

Thanks for your response and the further information asked for.

Then yes in prinicpal , you can claim the cost of using the office in London -if there are in fact any out of pocket expenses, as I imagine all costs you already claim against the rental income?

But all your travel costs will be allowable as these are incurred solely for business reasons.

Let me know if you wish me to expand on any element of the answr provided.

Thanks

Sam

Customer: replied 2 years ago.

It would be useful to know if there is any system where I can use both the studios as a tax expense and how to maximise that offset.

Expert:  Sam replied 2 years ago.

Hi Rushton

Thanks your response

You can - however you will already be getting ALL expenses on the London property against your rental income so cannot have expenss twice -as I assume ALL the loan intetest. all the heating and lighting bills, all the insurance etc etc are claimed against the rents you receice, which leaves NIL for the business you run in the loft -

So you CANNOT have the same expenditure twice .... which is what you seem to be suggesting on the London property, for which you would not have any out of pocket expenses - as you claimit ALL against the rental income.

You can claim for Waled - as ou do incur additional expenditure for working from home - which is NOT already been claimed against another source of income.

To simplify this further - lets say you had to travel to London to carry out a repair on the London property - and this cost you £85 return and you thought - well whilst I am in London I see a new client

You cannot then claim the £85 against the rental income and also the business income - its either/or OR half from each as your visit had a duel purpose.

So it isnt so far as there is no system by which you can do this, its simple a fact that you already have amde the full claim against the rental income for the entire out of pocket expenses.

Hope that helps explain the position, but if you do incur extra expenses in the London property in the loft that are NOT incorporated within the rental income expenses claimed OR you have been making a private use adjustment to all the housing costs claimed against the rents - so have an availability - some of which are business (with your trade) then and only then would you have a considered claim for London

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13775
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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