October questions and answers

Newsletter issue – October 2019.

Q. Our house has always been owned jointly by myself, my mother and my sister. My sister and I now want to buy our own homes and want to make mum the sole owner of our current home. If we put the house in her sole name will she have to pay capital gains tax (CGT) on it?

A. Transferring the house into your mother’s sole name will not trigger a liability to CGT, but it may have CGT implication for you and your sister. However, since you live in the property, it is quite likely that you would qualify for principal private residence (PPR) relief and no CGT charge would arise.

Q. I have recently started a new job and have been provided with a company car. I pay for fuel for private use but I can claim mileage for business journeys. Will I have to pay tax on fuel payments?

A. In addition to the company car benefit charge, employees have to pay tax on any fuel their employer provides that is used for private mileage. For 2019-20 this is calculated by multiplying the car’s CO2 percentage by £24,100. So, if the percentage is 30, the tax charge for petrol is £7,230. For a basic rate taxpayer, the after-tax cash equivalent is £1,446 and for a higher rate taxpayer £2,892. The charge is the same regardless of whether you use 2 litres or 2,000 litres of fuel.

However, this tax charge can be avoided if you pay all the private fuel costs back to your employer. You need to keep accurate records (mileage logs and fuel receipts) to support such a claim to HMRC.

Your employer can give you a tax-free fuel allowance if you pay for fuel used for business travel in your company car. HMRC publish new advisory fuel rates four times a year. The most recent rates, apply from 1 September 2019.

HMRC accept that, where an employer reimburses an employee for the cost of fuel for business mileage in a company car at the above rates, no taxable benefit arises.

Q. I have just started my first job working for a building contractor. My boss says I need to register for tax as a Construction Industry subcontractor. How do I do this?

A. You need to register with HMRC for both self-assessment as self-employed, and under the construction industry scheme (CIS). Effectively these are separate registrations, but they can both be done at the same time.

In most cases you can register as self-employed by calling the HMRC Newly Self-employed Helpline on 0300 200 3504. If you are already registered as self-employed, but need to register under the CIS scheme, you should contact the CIS Helpline on 0300 200 3210.

The contractor for whom you are working will ask you for your unique tax reference (UTR) and you need to provide this before you are first paid, in order to determine which tax deduction rate to use.

Under CIS, a contractor must deduct 20% from your payments and pass it to HMRC. These deductions count as advance payments towards your tax and National Insurance bill. If you do not register for the scheme, contractors must deduct 30% from your payments instead.

The UTR is issued when you are first set up under self-assessment to complete a tax return. If you have not previously been required to prepare a tax return, you will be given a UTR when you register as self-employed.

For further guidance on registration and other obligations for subcontractors, see the Gov.uk website at https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor.