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January Question and Answer Corner
Newsletter issue - January 09.
Q. Last year my friend's company; MC Ltd was having cash flow difficulties, so my company; IQ Ltd paid some the outstanding debts with MC's suppliers. The amount paid was recorded as a debt between our companies. When looking at the books of IQ Ltd the VAT inspector told me I should reclaim the VAT on the invoices IQ paid on behalf of MC Ltd. Is that correct?
A. The VAT inspector is wrong. Only MC Ltd can reclaim the VAT shown on invoices from its suppliers, as MC Ltd is the company that received the goods or services, not IQ Ltd. You have treated the transaction correctly. This shows how important it is for your suppliers to make out invoices correctly. If the invoice is addressed to a business that did not receive the goods or use the services, the VAT cannot be reclaimed.
Q. In 2001 I sold my city centre property and relocated my business to a converted farmhouse with workshops. At the time my accountant said I didn't have to pay capital gains tax on the sale of the city property, as the gain was rolled over into the workshops. If I now let my surplus workshops will I have to pay tax on the capital gain I made in 2001?
A. The gain you rolled into the cost of the workshops will not become payable until your sell those buildings. As long as you used the workshops for your own business at the time you bought them, the claim to roll-over the gain was valid and is not disturbed by changing the use of the buildings at a later date. However, as you no longer use the workshops for your own business you won't be able to roll-over the 2001 gain once more when you sell those buildings and buy another business asset.
Q. I am employed to teach a few courses at a further education college and I buy a few books each year to help prepare for those courses. Can I claim the cost of those books against tax?
A. The scope for employees claiming expenses, which are not reimbursed by their employer, is very limited. The expenses must be incurred while the employee is performing the job, not to prepare for that job. So the cost of books purchased to improve your underlying knowledge cannot be claimed against tax. Many taxpayers have fought this point in the courts, and lost. It would be better to get your employer to reimburse you for the cost.
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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