Peter Chalk & Co

Specialists in Taxation for the Clergy

Record Keeping & Important Notes

RECORD KEEPING AND SUGGESTED METHODS

There is a legal requirement for you to keep records. Generally you should keep records for 2 years after the tax year end- 6 years if you have income from property or self-employment.

There are many different ways to keep records. Probably the easiest way is in an analysis book or computer spreadsheet format- do remember to make regular backup copies if you use the latter method!

Where possible, receipts should be retained. If this is not possible, for example because they are submitted to the PCC for reimbursement, please note your records to this effect.

If you are meeting up with us to prepare your return, please bring all information requested; otherwise please only send us what we require.

A copy of a suggested expenses record sheet is available on request.  

 

ENQUIRIES

The introduction of Self Assessment (SA) brought in a “process now check later” system of dealing with Tax Returns whereby Returns received by HM Revenue & Customs are deemed to be correct at the time of submission. The SA system is policed by them using powers under Section 9A Taxes Management Act 1970 and they have 12 months from the date the Return is filed to enquire into a Return, thus a tax year cannot be said to be closed until that period of time has expired. The vast majority of enquiries are chosen at random and it should be remembered that it does not mean there is anything wrong with your Return. The Revenue will often look at the underlying records and, if these are poor or certain figures cannot be substantiated, this may mean additional tax is due for the year, or you may have to pay back part of a tax repayment that you have already received. This “window of opportunity” the Revenue has, should be born in mind when receiving repayments of tax, particularly if they are large.

On the subject of repayments it has come to our attention that many clients are of the opinion they should get a repayment of tax every year and are dissatisfied with our service if they do not. There are many variables in determining your tax liability including office expenses paid and reimbursements received. Ordinarily, the Revenue will assume that the amounts paid and received in one year will be broadly similar the next and will issue a tax code appropriately. Changes do occur, however, resulting in underpayments of tax, which we will do our utmost to minimise within the framework of legislation in place at the time.

RECORDING (LOG) OF OFFICIAL MILEAGE

HM Revenue & Customs frequently challenge mileage claims, so it is important that you keep accurate records of your travel.

Two types of journey count as Official Mileage for tax relief purposes:

· those you have to make in the course of doing your job.

· those you make to or from a place you have to attend in order to do your job. This does not include mileage on journeys such as ordinary commuting or private travel.

Relief is available only where travel is in the actual performance of the duties or where it is necessary – in a real sense – for you to attend the particular place on that occasion to perform the duties.

There is no relief for private travel or travel which may seem official but is undertaken on journeys which are not necessarily undertaken in the course of your duties. An example might be a trip to attend a committee meeting of a local charity- the dividing line is very fine!

A suggested form for a mileage log is available on request.

If in doubt whether a particular journey qualifies as business mileage, please ask.

ENTERTAINING

Generally the cost of reasonable entertaining on official occasions is regarded as deductible. Such occasions have been given to include entertaining visiting clergy, officers of the church or members of church organisations. It also includes the entertainment of couples receiving pre marital instruction, parents at pre baptismal meetings and members of the PCC assuming the visit was not purely social.

Bible study and alpha groups are also allowable. HM Revenue & Customs originally wanted to disallow these two groups but we have pursued this point vigorously and they have finally conceded. Entertaining on informal occasions or social gatherings is not allowable, neither are your own costs i.e. you cannot entertain yourself or your partner.

Where possible records should be kept of the actual costs. We advise that such records should include the date of the event, who was invited, their position within the church and the actual cost of the event.

Obviously we do not expect you to keep separate supplies of tea and coffee for entertaining purposes, these small costs may be estimated.

PAYMENTS TO PARTNERS/CHILDREN

Where deductions are claimed for payments to partners and children, e.g. for clerical assistance, cleaning and gardening, we recommend that a payment is physically made to a bank account in their name.

The amount paid should be commensurate with the duties undertaken and we recommend that details be kept of the duties undertaken and the pay rates.

Failure to meet with these criteria could be challenged by the HM Revenue & Customs.

Where children under 16 are paid for work, there are very strict rules to be followed. Firstly, a work permit must be obtained from the education department of your local authority. Secondly, the hours children are permitted to work are strictly limited. We recommend that anyone considering this option speaks with Peter Chalk or Nicola Serplus.

TELEPHONE

Where telephone bills are in the name of yourself, we require details of the total bills and the amount of private use.

If the parish have paid any contribution towards the business proportion please include this amount in your reimbursements.

Where the bills are in the name of the parish, we require no details provided you have paid your private share to the parish.

OTHER MATTERS

Capital Gains: Please remember to keep all contract notes where shares are bought or sold. When a disposal occurs you should be able to present to us both sale and purchase notes to enable any potential Capital Gains Tax liability to be accurately calculated.

Computers: There are two types of expenditure you might incur in connection with your computer- capital and revenue.

Capital expenses include the hardware- both the original cost and the cost of upgrades such as more memory, new printers etc.

Revenue expenses include software (although this should be included in office equipment), small amounts of cabling and small amounts of a minor nature.

The difference for tax purposes is that revenue expenditure is claimable in full for the year it is incurred, while relief for capital expenditure is generally spread over a number of years.

We have experienced problems in the past with capital expenditure being claimed as revenue- the golden rule is, if in doubt, ask!


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