October Question and Answer Section

Newsletter issue - October 2010.

Q. As I was made redundant last year I decided to take time out and build my own house. A neighbour told me I could claim back the VAT on my costs, even though I am not a VAT registered builder. If that is true, how do I go about claiming?

A. You can reclaim VAT correctly charged on your building materials and on most of your building services, using the VAT refund scheme for DIY builders. The claim form for new builds under this scheme (VAT 431NB) can be downloaded from the HMRC website, but be sure to also read the guidance notes. There is a different form (VAT 431C) to use where you are converting a property rather than building it from new. In either case you can't reclaim the VAT charged on professional services connected with the build, such as architectural or legal services. We can help you compile and submit your claim to the VAT office.

Q. A large UK company has made a late payment of fees owed to my company. They paid interest on the late paid amount, as they are required to do so under the contract, but they deducted tax from that interest. How do I deal with that tax in my accounts?

A. Your customer should not have deducted tax from the interest it paid, as both parties involved in the transaction are UK resident companies trading in the UK. Companies used to have to deduct income tax from annual amounts of interest paid, but that requirement was removed from 1 April 2001 where the recipient is a UK company. Ask your customer to pay you the amount of interest it has withheld as 'tax'. We can provide a longer explanation of the legal position if you need it.

Q. I have received several emails recently from organisations claiming I could use an employee benefit trust (EBT) to reduce tax. Is this a scam, or is there something in it?

A. In outline a lot of EBT schemes work like this: the company pays money into the EBT and employees of the company receive a loan from the EBT in place of all or part of their salary. The employees pay tax on just 4% on the loan per year. This all sounds good, but there can be various problems in practice. Some schemes are more aggressive than others and you should be prepared for the Taxman to look very closely and try to challenge such arrangements. They are not for those not willing to take some risk and you should be made aware of all the risks involved before proceeding.

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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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk