November Questions and Answers

Newsletter issue - November 2014

Q. Last year I bought a run-down pub and converted it into a restaurant. I registered for VAT after the work was done, but before the restaurant opened. Can I reclaim any of the VAT paid on the costs of converting and fitting out the restaurant?

A. It is easy to see with hindsight, but you should have registered for VAT at the point you started the conversion work. You can claim back VAT charged on services incurred in the six month period that ends with the date you registered for VAT, which might not cover all of the conversion costs.

There is more flexibility for the assets you purchased to use in your restaurant business, such as tables and kitchen equipment. We need to look at each asset purchase individually, but if you still held the assets at the date your VAT registration took effect, the VAT on those purchases should be reclaimable.

Q. HMRC has sent me a tax calculation for 2013/14 which says I owe over £5,000. I don't understand how this much can be due as all my tax is dealt with under PAYE and I don't have any other significant income. What should I do?

A. You will have received a form P800 showing the tax deducted from your pay under PAYE, and the amount of tax due based on your total income for the year. HMRC has admitted that a large number of the P800 forms sent out in recent weeks are incorrect. In many cases part of the taxpayer's income has been double counted, but the tax deducted has not, leading to an apparent underpayment of tax.

Your first step should be to compare the P800 calculation with the P60 form given to you by your employer in May 2014. Where the total income shown on the P60 is less than your employment income shown on the form P800, there may be a problem. Also check if any of the figures on the P800 are estimated, such as rents or interest received. If the HMRC figures appear to be wrong, we can help you get the tax calculation corrected.

Q. My personal service company stopped trading on 31 August 2014, after a good run of 10 years. There is about £22,000 available to distribute to me as the only director/ shareholder. Can I claim entrepreneurs' relief on that pay-out and do I need to show it on the tax return?

A. Distributions from an informal winding-up of a company of no more than £25,000 are treated as capital gains, so you should be within that total with a final distribution of £22,000. If the total distribution from the company made in anticipation of the winding-up exceeds £25,000, then the whole distribution is taxed as income, unless the company is formally liquidated by a liquidator.

As the company has been trading for more than a year and you have held at least 5% of the shares for that time, as well as working for the company, entrepreneurs' relief should apply. This reduces the tax rate payable on the gain to 10% after deducting your annual exemption of £11,000 (for 2014/15), it doesn't eliminate the gain. You need to claim entrepreneurs' relief on your tax return and include a computation of the gain. We can help you with that.

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