John Whiting of PricewaterhouseCoopers answered your tax questions.
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I am a basic rate tax payer. I have some capital gains (CGT) to take. If, after the annual £8,200 allowance is deducted, is the gain treated as income. So that I could, in theory, pay some CGT at 22% and then the rest at 40% when total taxable income enters the Higher Rate band?
Peter Neail from Farnborough
Yes, you're right - the excess of taxable gains over and above the annual exempt amount are treated as income. The rate of tax you'll pay depends on the amount of income you have - so it sounds as if you will end up paying some tax at 20% (not 22%, in fact) and then some at 40%.
I am 16 and have a part-time job, can I claim back any of the taxes associated with my pay?
Jimmy Doyle from Coventry
You've got a personal allowance of £4,745 like everyone else so you can have income, tax free, up to that amount . So if you've paid income tax you may be due a refund if your income doesn't reach that level or is just over.
National Insurance works in a different way - on weekly amounts. If you earn over £91 a week, you'll pay some national insurance contributions and you are stuck with that (as my daughter found with her summer job!).
I have stock options given to me by my employer. I intend to exercise some of these. Are the gains subject to income tax or something else?
Chris Richold from St Albans
Depends! If these are from an "approved" - Inland Revenue approved - share scheme (the SAYE-linked share option scheme is the usual one) then CGT will apply when you sell the shares and there will be no income tax (or NIC) implications. Provided you've kept to the scheme conditions over length of ownership etc.
However, if it's an unapproved scheme, then there will be income tax/NICs when you exercise the options on the gain you have made up to that point. There will be a capital gain after that (hopefully!).
I am going to be investing £6,000 for a number of shares into a small company that I work for. So my question is if the company is sold four to five years down the line, what tax would I be liable for? Capital gains or just income tax?
Richard from Swindon
You will be liable to capital gains tax. As it's the company you work for, any shares that you have held for two years or more will only be taxed at 10% (5% if you are a basic rate taxpayer) thanks to the tapering relief. You'll also have your CGT annual exemption that you can use.
Could you please say whether a lump sum from a Local Government Pension scheme (the amount is over £30,000) is taxable please. There is no salary or redundancy applicable, it is just from the pension fund. Thank you.
John Bradley from Corsham
If this is the lump sum that you are taking from your pension fund when you retire, then it should be tax free. A pension fund is allowed to give a lump sum equivalent to 25% of your fund in this way. Check the scheme rules to be certain.
In a will I want to pass the maximum amount (IHT tax free) to one person and the rest to my wife (which will be IHT tax free). How do I word this in the will without specifying the amount (as the amount increases each year)?
Prabhu Shah from Uxbridge
There's nothing to stop you putting a legacy in your will expressed as "an amount equivalent to the nil rate band for IHT at the time of my death". Some people put it that such an amount shall go to a discretionary trust - the nil rate discretionary trust.
I am interested in buying a triathlon bicycle from the US to capitalise on the $ rate. Is it the case that I would have to pay 32.5% tax (VAT + 15% excise duty) and is there any way round this? The bike costs $3,599 but £3,999 here in the UK! What about buying it in pieces (e.g. a frame, then components and wheels all at different times?
Martin Boddie from Windermere
The taxes that you are in for are VAT (on import of goods - here your bicycle) and Customs Duty (as you are bringing things into the EU). VAT here is at 17.5% and will be charged on the value. Customs Duty will also be charged on the value but at rates according to what it is. I remember dealing with a consignment of bikes a few years ago and discovering that taking the handlebars off and bringing them in separately meant that we were bringing in components and they attracted a lower rate of duty than the bikes - so the client went down that route and saved a lot of money. Whether it would work for a single bike I'm not sure but it would be worth checking with Customs first.
I am a professional gambler who uses online betting exchanges to gamble on day to day. Are my winnings taxable if they are my sole income ? If they are, do you know of any government changes coming in that could change this? Should I be filling in a tax return form?
Mr Piper from Watford
If that is your trade/profession - i.e. what you make your money from - then it is taxable. Occasional gambling/betting wins are not taxable - it's a question of fact and degree. Undoubtedly, the Revenue do miss some people who make a (partial) living from betting but if it's a full-time activity then they would expect you to declare your profits.
I work for an Internet company. When I started in 1999, the company I worked for said that we would try and work a loophole in tax law that would mean that I wouldn't have to pay tax on the rent they paid for the house I live in. Basically, they wrote in to the contract that I was required to live in the house to do my job properly. Now almost six years later the Inland Revenue Service has thrown that out. And I have been informed to expect a large tax bill.
What I was wondering is how far back can they go to claw back the tax? And if there is anything I can do against my company for this mess they have put me in?
Graham Burgess from Shifnal
Normally when an employer gives an employee accommodation there is a taxable benefit. What your employer was trying to argue was that you had "job- related" accommodation - you had to live there to do your job properly, or for security purposes. The Revenue do police it quite carefully (as you would expect). So if they are challenging you then you'll have to really demonstrate that you had to be there (at all hours of the day or night perhaps to keep the computers going?). If they do claim the tax, normally they will go back six years from when they first raised it.
I am selling a property that I have owned for 15 years, I lived in it for eight years (up until 1998 as my main and only residence) and I have since rented out for the past seven years.
What allowances am I entitled to claim apart from indexation allowance and taper relief?
Pam Meecham from Silver End, Essex
In principle you're tax free for the period you live there, taxable for the rest of the time. However, you get some period of "deemed" residence - the last three years of ownership in any event. That means that you'll end up with 11/15 of the gain tax exempt. Depending on the reasons you were away from the house - if you were working abroad for instance that gives you further periods of deemed residence.
Then there is another relief for letting a property that has been your main residence. That can give further CGT relief of up to £40,000, though the calculation can be involved. The result is that you may have little or no tax to pay at the end of the day.
I've just ordered a copy of IR 152 on trusts as mentioned by your tax expert and the IR told me that it was made obsolete on 30 September 2004. I'm not complaining! But wondered if this is a prelude to some major changes to trust/tax laws. Maybe you can investigate?
Ian Phillips from Bude, Cornwall
There are changes afoot in trust taxation - scheduled to come in from April - and indeed there were some changes made last April. But as a general guide to what is a trust, I think it's still valid and gives a good outline of the tax rules. I wouldn't call it obsolete (there are many other things on the Revenue's website that I do regard as obsolete!).
Further to your comments about income for children being taxable after the first £100, what about savings deposited in a building society 'young savers' (i.e. not taxable) type account specifically for school fees in a few year's time - not income for our child. Should we be paying tax on these savings?
Sarah Gibbs from Wokingham
Technically, yes. The fact that it's the child's income and is earmarked for the child's expenses (which would otherwise fall on you as parents) does make it subject to the £100 rule if it derives from capital that the parents have provided.
You mentioned on the programme that gifts from parents to children that result in income of over £100 are treated as if it was the parents' income. My children often receive gifts of cash from relatives for birthdays etc. How do we demonstrate this is from relatives and not from us? We have often used the cash ourselves and posted a cheque to our children's savings account. As this makes it look like the gifts are from us, I presume we need to stop doing this?
Lisa Maynard from Coventry
That's a good, practical question. In an ideal world you'd keep a careful log of the gifts (get the children to do it when they are doing their thank you letters ....like mine... don't!). But being practical, that isn't going to happen and the Revenue aren't going to ask questions about normal sums. Try and keep a note of significant sums - if granny suddenly passes on £5,000, make sure you can show where that came from, for example.
I am 62 and soon to retire from a NHS job. I have a son and daughter. My son is in his 30s and has been ill with ME for over 15 yrs. He has a DSS allowance and housing benefit. I have some extra money and I would like to buy a flat worth around £80,000 for him so that he has some security. How can I do this so that he can retain his living allowance and remove it from my inheritance tax. I would appreciate your advice. I intend to give my daughter the same amount. Thanks.
Rosemary Noon from Helensburgh
The simple answer would be to give him the money (or buy the flat and give him that). That would get the value out of your estate for IHT purposes and wouldn't be relevant for IHTat all after seven years.
There is the issue of his living allowance. I'll have to pass on the rules of that, I'm afraid, perhaps via the DSS. It may be that you can achieve what you want via a trust - probably a discretionary one - but it is something that I'm afraid you'll have to look into further.
My wife and I bought a house and lived in it for four years. Last year I studied for an MBA and hence my wife and I moved into rental accommodation near the university and rented out our own house. I am now looking for work and once employed we will relocate. At this point we will want to sell the original house in order to buy another. Will we be liable to capital gains tax when we sell our house as we don't at present live in it? Thank you in advance.
Craig Harrison from Newport Pagnell
Probably not - as you lived in the house you'll get the last three years of ownership counted as living there. Then if you are working elsewhere in the UK, you're allowed another period of up to four years, provided you lived in the house again afterwards.
As a 40% tax paying retiree (30 April 2001) I initially forgot to declare (pre-30 September 2002 tax return) a redundancy payment because I erroneously presumed that all the tax due had been taken at source. I then suddenly realised in October 2002 that I had omitted to declare this payment and then in pursuit of the relevant data from my previous employer realised that the payment over £30,000 had only been taxed at 22% not 40%. (which should have been obvious to the IR because I had only had one full-time employer for 34 years for which they clearly had all my details). On 4 October 2002, following a phone call with the IR I wrote to them explaining my sudden realisation of the 22% taxation and sought a sensible repayment period. I received no reply. I have only now just heard (10 February 2005) from the IR regarding the underpayment of this tax. There are accusations of negligence and threatening a penalty and requesting me to make them an offer in settlement of tax due, interest and penalty. I have just watched your programme and heard you mention the issue of two years and therefore am I still fully liable for this tax debt?
Edgar Williams from Huddersfield
You may be at fault for not entering full data on your tax return, but the Revenue are also at fault for not following through information that they got from your employer. So don't give into their threats of penalties yet. I can't offer a way out of paying the extra tax on the redundancy money - though it is an interesting question as to whether they could open up an enquiry into your tax affairs if you hadn't told them - another reason not to let them bully you. You are making a voluntary declaration after all!
I would set out the timescales, timings of the various contacts that you have had and details of the amounts involved. And make the point that you owned up, not them finding you, and suggest at the end that you only be required to pay the actual tax underpayment. They'll probably want interest as well, but hopefully no more.
My father-in-law died in 1998 leaving his house for the benefit of his wife till her death or remarriage. She died in October 2003. The house was sold in 2004 and there was an increase in value between her death and its sale. The proceeds were distrusted to the beneficiaries of his will. Who is liable for the CGT?
Ivor Lockie from Aberdeen
The increase in value during the period after death will be dealt with as a gain made by the executors, effectively on behalf of the beneficiaries (assuming they were managing things at the time).
I was made redundant (by a charity) at the end of September 2004 and would normally have been entitled to two months' notice. Because of a complete breakdown of trust between my manager and me, I asked to go as soon as possible. The charity agreed to this. The charity has stated that I was not on gardening leave during October and November 2004, but they have deducted income tax and national insurance contributions for those two months. My understanding is that I was not entitled to two months' notice, and that any payment the charity chose to make should then be rolled into my redundancy settlement and would be tax free. Can I have your opinion, please?
John Reeves from Oxford
It is something of a question of fact. They seem to be regarding you as being on garden leave (so you would get taxed and NIC'd as normal). Difficult to overturn this but you could set out your case to the Revenue and ask for a refund (I assume your total pay off wasn't above the £30,000 limit). You'd have to show it wasn't pay in lieu of notice etc. It is in the employer's interests to classify as much as possible as redundancy. By the way - they don't have to pay NICs on it at all.
I own 200 shares in Banco Santander (formally Abbey National). I am unemployed and therefore registered as a UK non-tax payer. Is there a way that I can avoid paying UK and or Spanish tax upon selling my shares or can I reclaim the tax back from the Revenue. I have just received a share dividend where the Spanish tax has already been deducted, Can I get this tax back as well.
Martin Simister from Romford
You won't have to pay CGT on selling the shares - your annual exempt amount of £8,200 should easily cover the gain you make. You'll have no income tax liability in the UK either. Sadly, the tax you've had deducted in Spain is lost and you can't recover it.
The opinions expressed are John's, not the programme's. The answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.