`One off` increase in VAT turnover

In case turnover increases as a `one off` and the business does not wish to register for VAT.

We have to write to the HMRC with evidence to convince them that turnover will not go over £83k (current de-registration threshold) in next 12 months.
HMRC Link below (see bottom of the page):
https://www.gov.uk/vat-registration/when-to-register

Primary legislation (see Clause 3):
http://www.legislation.gov.uk/ukpga/1994/23/schedule/1

Dormant Company

Dormant according to Companies House

Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.
Significant transactions don’t include:

  • filing fees paid to Companies House
  • penalties for filing the accounts late
  • money paid for shares when the company was incorporated
  • More information can be found here.

Dormant for Corporation Tax purposes

HMRC views a dormant company as a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax. More information can be found here.

Buy to let – Lease premium

Client had a leasehold residential buy to let property. He paid a hefty premium to extend its lease term by another 70 years.

The question was whether we should treat this expense as revenue or capital.

If we took it as revenue expenses, this could be immediately deducted from the rental income and save tax immediately.

If we took it as capital expense, we will need to wait till the property is sold before we can use these expenses as a deductible expense.

Common sense guides us that any expense done to enhance the value of the property is a capital expense but in tax world many times common sense and tax laws are divergent thus we need to clarify it with a credible source.

HMRC manuals were not easily revealing the answer thus an open search on google took us to a webportal which confirmed our understanding i.e. it’s a capital expense and pointed out the HMRC manual part.

Please read the link below:
https://www.property-tax-portal.co.uk/taxquestion93.shtml

HMRC Manual reference CG71401; link
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71401

 I will suggest also read CG71400: Introduction – which give a bit of background; link
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71400

Wet signatures from client

Today a question cropped up – should accountant always take wet signatures from clients as their approval?

HMRC is of the opinion that it is not compulsory.

Client can give approval by electronic or non-electronic means.

Source Link: http://webarchive.nationalarchives.gov.uk/20140206222144/http://www.hmrc.gov.uk/ebu/2012-copyspec.pdf

 

Informing HMRC about change in details

When I use to live on rent, I use to have a list of people and organisation to inform whenever I moved houses like employer, bank, subscriptions etc.

One of them was HMRC.

We need to inform HMRC in number of scenarios:

Change in personal details

  • Name
  • Address

Change in Income:

Relationship or family changes

  • Like when you get married or divorced.

 

For more details and the process of how to inform HMRC see link below: https://www.gov.uk/tell-hmrc-change-of-details