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March questions and answers
Newsletter issue - March 2018.
Q. I am a sole trader and have been trading for several years. My turnover has now exceeded the VAT registration threshold and I have registered with HMRC accordingly. I am currently waiting for VAT number and certificate. Will I be able to claim back VAT on purchases made by the business before the registration date?
A. There is a time limit for backdating claims for VAT incurred before the effective date of registration. From the date of registration, the time limit is:
- 4 years for goods you still have, or that were used to make other goods you still have;
- 6 months for services.
You can only reclaim VAT on purchases for the business now registered for VAT and they must relate to your 'business purpose'. This means they must relate to VAT taxable goods or services that you supply.
You should reclaim them on your first VAT return and keep records including:
- invoices and receipts;
- a description and purchase dates;
- information about how they relate to your business now.
Q. I own a buy-to-let leasehold property, which currently has 49 years remaining on the lease. Can I claim a tax deduction for the legal and professional costs of extending the lease?
A. The normal legal and professional fees incurred on the renewal of a lease are generally allowable if the lease is for less than 50 years. But any proportion of the legal and professional costs that relate to the payment of a premium on the renewal of a lease are not deductible.
Where a replacement lease follows closely on a previous one, and is in broadly similar terms, a change of tenant will not normally make the associated legal and professional costs disallowable. Any proportion of the legal or other costs that relate to the payment of a premium on the renewal of a lease will, of course, remain disallowable.
Q. I am self-employed and have been claiming capital allowances on certain business items. If I close down the business and move into employment, but continue to use the same assets for my work, can the transfer from one to the other be at the written down value, or will there be a balancing allowance at the date my business ends?
A. Strictly, the open market value should be used for the transfer, so that balancing allowances or charges result. However, since employees can claim capital allowances for equipment they provide for use in their work, and this will be a transfer between 'connected persons', you will be able to make an election to use the tax written down value for the transfer instead.
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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