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August Question and Answer Corner
Newsletter issue - August 07.
Q. I am about to sign a lease for a new shop, but the landlord wants to charge VAT on the lease rental payments. The solicitor has grossed up the lease payments including VAT for the full lease term, to calculate the Stamp Duty Land Tax due. This means I am paying Stamp Duty on the VAT on the rents. Is that right?
A. Unfortunately the solicitor is correct. If the landlord has opted to tax the building for VAT purposes he must also charge VAT on the rents due under the lease. Stamp Duty Land Tax is calculated on the net present value of the gross amount of the rents, including the VAT charged, whether or not you can reclaim that VAT.
Q. I applied for a VAT number for my new business months ago, but it still hasn't arrived. I now need to invoice clients, or I will run of cash. What should I do?
A. Ringing the VAT office to chase up your registration application is probably a waste of time. You probably won't get through, and if you do, it won't speed up the process. You can send invoices to your clients but you can't technically charge the VAT due until you have your VAT number. You can do this by either:
- issuing an invoice for the net amount, then when you VAT number comes through send a VAT-only invoice to collect the VAT due; or
- sending a 'request for payment' for the full amount including VAT , but do not separate out the VAT and make it clear the request for payment is not a VAT invoice. When you VAT number arrives send a correct VAT invoice, showing any amounts that have already been paid.
In either case you need the co-operation of your clients and you will need to go through the invoicing process twice.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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