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May Question and Answer Corner
Newsletter issue - May 07.
Q. Can I treat my buy-to-let property as my main home so it is exempt from capital gains tax?
A. You can only treat your buy-to-let property as your main home for capital gains tax purposes if you actually live in it for a period, so the property cannot be let out at the same time. This period can be quite short, such as a few months, but you do need to have some evidence that you lived there to show the Taxman if he should ask, such as utility bills or correspondence. If you also have another home which you plan to return to you need to make an election to state which property is your main residence.
Q. I have received a leaflet from the VATman that says the flat rate VAT scheme would save me a lot of time and hassle, is this true?
A. Under the flat rate VAT scheme you simply multiply your gross sales (including VAT) by a percentage ranging from 2% to 13.5%, depending on your trade sector, to calculate the VAT you owe the VATman. This may be quicker than adding up all the VAT paid on your purchases, and deducting that figure from the VAT charged on your sales, but it could cost you money. If you are in a sector with a high flat rate percentage, or you have a high ratio of purchases to sales, you may end up paying more VAT to the VATman under the flat rate scheme. However, in other cases you can pay less VAT. Ask us to help you with the calculations.
Q. My mate is starting a new business and wants me to invest. Should I lend him the cash or buy shares in his new company?
A. If the business fails you are more likely to get your money back from a loan than as shares, especially if the loan is secured on the assets of the business. If your loan is not repaid you can claim a capital loss, which can be used against you other capital gains, if you have any. If you subscribe for shares and the company fails you can claim the amount paid for shares as an income tax loss, which is usually better for tax purposes. If the business is very successful you won't make a profit from the loan if the business is later sold for a huge amount, or becomes listed on the stock exchange. To realise those gains you need to hold shares in the company.
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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