Tax Question of the Week: Irrecoverable Loans

Q- My client has made a directors loan to his personal company (he is the majority shareholder) which now cannot be repaid. Is there a loss for CGT and if so, is it a ‘clogged loss?’

A- There are a number of issues to be determined in this situation:

  • Is there an allowable loss at all?
  • Is it a connected party transaction
  • Has there been a disposal?
  • Is any allowable loss ‘clogged’?

Read More

VAT Question of the Week: TOGC Property Rental Business

Q- Our client is looking to purchase the freehold of an industrial estate made up of six commercial units for £1.8m. They will set up a new limited company to buy the site. Four of the units are tenanted and two are empty. The current tenants have considerable time left on their leases and after the sale, they will remain in place.  The vendor is VAT registered as his turnover from the properties exceeds £85,000, and he opted to tax to recover the VAT on the purchase 12 years ago. A deposit is payable to the vendor in 2 weeks’ time and my client’s solicitor is asking whether the transfer of going concern (TOGC) provisions have been met so the sale is outside the scope of VAT. Will this still be a TOGC as the site is only partially let?

A- The TOGC provisions can still apply where a site is purchased and some units are tenanted and some temporarily vacant as long as the units are sold as a portfolio of properties that have been used together as a rental business.  This is confirmed in HMRC’s manual VTOGC7050.

Where the conditions are met, TOGC rules are compulsory; the parties cannot choose not to apply them. Where we have the sale and purchase of a property rental business and the new owner will continue renting to the current tenants, this will be a TOGC provided they meet the conditions below. Read More

Tax Question of the Week: CGT PPR Changes

Q- I can recall that in the course of the 2018 Budget, changes were announced about the rules for some of the ancillary reliefs on disposals of private residences. I can see no new Legislation on these points. What is the current position please?

A- You will be referring to the proposed reduction of the exemption for the final period of ownership from 18 to 9 months and the restriction of relief for letting to circumstances where the owner of the property is in shared occupancy with the tenant.

The announcement was that the changes would apply from 6th April 2020.

The announcement promised consultation on these changes and technical aspects. To date, there is no consultancy, so the announcement, at best, is a warning shot that there may be some changes. Read More

VAT Question of the Week: Adjustments on Repossessed Goods

Q- My client is a VAT registered builder and purchased a van for his business on hire purchase (HP) two years ago – because it was anticipated that title would pass in the future once all the payments had been made, it was treated as a supply of goods, and my client reclaimed all of the input tax up front. He is now struggling to meet the monthly repayments and the finance company is in the process of repossessing the vehicle. Does my client have to account for any VAT when the vehicle is repossessed, or are there any adjustments to the input tax that was claimed?

A- Firstly, it is important to identify the type of credit agreement that is in place. In your client’s circumstances, under an HP agreement, where it is anticipated that title will pass in the future, this is treated as a supply of goods at the outset, thus meaning VAT is charged and recoverable at the start of the agreement.

However, lease agreements where title will not pass, or agreements where there is a large balloon payment at the end that make it highly unlikely that title will pass, are classed as services, and VAT is charged on the monthly payments, not at the outset. It is often worthwhile checking how the supplier/finance company is treating the supply. Read More

HR Experts: Dress Codes for Hairstyles

Q- My client has read in the news that having a dress code which place restrictions on hairstyles may be discriminatory, is this right?

A-It is likely that your client is referring to the recent decision of the New York City Commission on Human Rights, who in efforts to tackle racial prejudice, have prevented organisations from banning specific hairstyles in their company. Although this relates to US law, it would be a good idea for your client to apply the same principle to their own dress code and consider where certain requirements may be discriminatory. Read More

Tax Question of the Week: New Payslip Legislation

Q- My client has asked me about the new legislation regarding payslips that comes into effect in April 2019. Can you shed some light on this?

A- From 6th April 2019 new legislation around providing payslips comes into effect, under which:

  • All employers will be required to provide payslips to all ‘workers’, and
  • Show hours worked on payslips where the pay varies by the number of hours worked

Who is entitled to a payslip? Read More

VAT Question of the Week: Online Traders selling to Germany using Amazon

Q- My client is an online retailer, selling through Amazon and other online marketplaces. They have recently received correspondence from Amazon with regard to the online sales they make to customers in Germany. It appears that Amazon is insisting that my client must VAT register in Germany if they want to continue to sell to German customers via Amazon. Can you advise what has prompted this action?

A- You may be aware that from 15 March 2018 new legislation allows HM Revenue and Customs (HMRC) to hold  the operator of an online marketplace jointly and severally liable for the unpaid VAT of overseas sellers operating on their marketplace where: Read More

HR Expert: Preventing Annual Leave Carry Over

Q- My client had a number of staff who didn’t take their full allocation of annual leave during 2018 which meant this time was ‘lost’, what can they do to prevent this from happening again this year?

A- It is understandable why your client may feel uneasy with staff having to forfeit their untaken leave at the end of the year, however, the good news is there are a number of steps they can take to avoid this situation occurring in the future. Read More

Tax Question of the Week: a Valid Notice of Enquiry

Q- A client is being chased by HMRC in relation to an enquiry that may not be valid. The client moved house and changed tax advisers but HMRC sent a notice of enquiry to both the client’s old address and to the previous tax adviser. Is there a possibility that the enquiry can be cancelled?

A- HMRC may enquire into a personal tax return if they give notice of intention in a “notice of enquiry” to the person whose return it is within the time limit allowed under s 9A(1) TMA 1970. The time allowed is specified in s 9A(2) TMA 1970 and where a return is delivered on time is up to the end of the period of twelve months after the day on which the return was delivered. Read More

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