Archive May 2019

VAT Question of the Week: Home Office

Q- My client is the director of an interior design company. The company rents a small unit for storing stock, but this space is not really suitable for use as an office. She is exploring the possibility of having a home-office erected in her garden. Could you please advise on the VAT recoverability of such a project?

A- Variations on this question are posed to the VAT Advice Line on a regular basis and although each case must be judged on its own merits, there are a number of common principles, which give an indication regarding VAT recovery.

Section 24(1) VAT Act 1994 defines input tax as VAT on the supply to a taxable person of: Read More

HR Expert: Jury Service

Q-My client has been informed by an employee that they have been summoned to attend jury service, what are the rules around this? 

A- The chances are that a lot of smaller employers may be less familiar with handling requests for time off to attend jury service. However, it is important that your client has an understanding of their obligations in this scenario.

Read More

Tax Question of the Week: Capital Gains

Q- My client owns a joint share in the freehold of a building which consists of five flats. One of the flats is occupied by my client under a 999-year lease.

The freeholders are to grant a new long lease over another flat in the building. My client understands that this will be a capital gains disposal event, but has queried whether a measure of principal private residence relief would be due to him, given that the disposal is out of the freehold interest he owns that includes his main residence.

Can you please confirm how to approach my client’s capital gains position, whether any main residence relief would be due to him in these circumstances and how this would be calculated?

A-Your client’s share of the premium will be taxable as a “capital sum derived from an asset” under s22 TCGA 1992 – the asset being your client’s interest in the freehold. S42 TCGA 1992 allows a proportion of the brought-forward base cost to be set against the premium received. This is achieved by multiplying the capital gains base cost by the result of the formula “A/A+B”  where “A” is the disposal value received,  and “B” is the residual value of the asset after the disposal. As an example: Read More

VAT Question of the Week: Flat Rate Pre-Registration VAT

Q- My client is about to register for VAT and wants to use the flat rate scheme as she meets the conditions and it would be beneficial to her. However, her intention is to register for normal VAT initially, in order to recover pre-registration input tax, and then after the first return has been filed, switch to the flat rate scheme. Is this acceptable or will HMRC challenge it?

A- Input tax incurred after the effective date of registration is not recoverable, under flat rate rules, with the exception of capital items costing more than £2,000 including VAT.

However, there is no need to switch VAT accounting schemes to recover pre-registration input tax.  HMRC Notice 733, confirms at para 7.6 that a trader using the flat rate scheme can recover input tax on goods and services prior to the effective date of registration (EDR) under the normal rules.

The normal rules for pre-registration input tax can be read in VAT Notice 700 (section 11) and in HMRC manuals VIT32000 – Read More

Tax Question of the Week: Professional Fees

Q- My clients have inquired about the possibility of claiming relief for expenses incurred in connection with closing down their company.  In particular, they would like to know whether they could get tax relief for professional advice that they have taken and whether they can arrange for the company to make pension contributions on behalf of employees.

A- As ever, we must first consider whether the expense meets the wholly and exclusively (‘W&E’) test for the purposes of trade (s54 CTA 2009). We also consider whether the expenses are capital in nature. If the W&E test is not met or the expense is considered to be capital then the expense will be disallowed in computing profits. Read More

Making Tax Digital for VAT

Digital recordkeeping requirements: Treatment of supplier statements or individual invoices

The Croner Taxwise VAT Advice line has received numerous calls from accountants whose clients receive large numbers of invoices from single suppliers,  such as builder’s merchants or drugs companies.

VAT returns for those clients have historically been prepared based on the supplier statements ( often a monthly summary), rather than the individual invoices.   However, the concern until now has been that the MTD requirement relating to digital record keeping of supplies received required each supply received to be recorded individually –  an exceptionally onerous task. Read More

Tax Question of the Week: Pension Deductions

Q- We have received many queries from payroll departments on how to process refunds of pension contributions when auto-enrolment and opting out span a tax year. There is also some confusion about relief at source and net pay pension schemes so we hope this article helps all those clients processing payrolls.

A- A newly established Ltd Company who recently registered for PAYE now had to comply with Auto Enrolment duties and so began the auto-enrolment process for all eligible employees in March 2019 (Pensions Act 2008 section 3).  The client was unsure how refunded contributions should be processed in the April payroll should any employee chose to opt out. (Pensions Act 2008 section 8).

Paragraph 44 of Pensions Regulator Detailed guidance for Employers states:

When an employer is given a valid opt-out notice, they must refund to the jobholder any contributions that have been deducted from pay (less any tax due) by the refund date, which is either:

  • within one month of being given the valid opt-out notice, or in the next available payroll run after they were given the notice”.

Read More

HR Expert: Physical Contact at Work

Q- My client has recently read online that some staff are calling for physical contact at work to be banned, is this something they need to think about

A – Your client is likely referring to the recent study conducted by Totaljobs, which revealed that 76% of respondents would like the level of physical contact they experience in work reduced, whilst 42% would like an outright ban on certain interactions. Read More

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