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Tax claim against new glasses

No you can’t

Here is my latest tranche of UK Tax Questions Answered. Each question is from a Tax Blog reader which I hope will be helpful to you or at least you’ll find the answers interesting. The Topics today:

  1. VAT repayment refusal
  2. Materials, Net or Gross?
  3. Property split between spouses
  4. Exempt or Vatable?
  5. Broken glasses
1. VAT repayment refusal

I am an electrician and have just had a VAT inspection because I submitted a VAT Return which gave me a large repayment. The Inspector has disallowed a whopping £3,780 of Input Tax on the installation of a new kitchen and associated electrical products (microwave, dishwasher etcetera) in my house. I told him that it was a genuine business expense because I am an agent for a large kitchen units and appliances wholesaler and that they’d insisted that I had to install their latest luxury range in my house for demonstration purposes. Have I any grounds for an appeal against the decision?

Answer

There is a small possibility that the Inspector may entertain an appeal if you can obtain a letter from the kitchen supplier that clearly states that as a condition of you acting as an agent for them, you were required to install the luxury kitchen and appliances. However, even if you can get such a letter it’s likely that ultimately you will be unsuccessful in any appeal, as you also use the kitchen domestically for your family.

2. Materials, Net or Gross

I am a self-employed builder and recently registered for VAT and need to issue an invoice. I was going to do so by showing the labour cost, then the net material cost, plus VAT on the total; however my bookkeeper has told me that it should be the labour cost, then the gross material cost, plus VAT on the total. Which one is correct? Thank you

Answer

I am pleased to tell you that you’re correct and not your bookkeeper. Any VAT on materials that you buy will be reclaimed as part of your VAT return, therefore the VAT exclusive value of any materials is what should be entered on to your invoice.

3. Property split between spouses

I have owned a small commercial rental property for many years, and have always reported the rental income on my SA Tax Return. I got married 5 years ago and our wills state that every asset should be split equally, so does that mean that I should have split the rent between us and show it on both tax returns? Unfortunately, if this is done my wife’s 50% share will put her into the higher rate band. What should I do?

Answer

You need to do absolutely nothing, as the will only becomes effective upon your death. The present tax treatment of the rent is correct unless and until your wife acquires a legal interest in the property.

4. Exempt or Vatable

I am a builder and bought a small three storey office block in 2006 as an investment. I’m now in the process of converting it into six residential flats. My solicitor has informed me that I may have to charge VAT when I sell it; is this correct, because if so I may struggle to find a buyer and end up in serious financial problems. Have you any advice that might help me?

Answer

Well I have some good and some bad news. The good news is that given the date that you bought the building, you should be able to easily demonstrate that the building has not been used for residential purposes for ten years prior to sale; in which case the sale is exempt from VAT. The bad news is that if the sale is exempt from VAT you cannot reclaim the input tax on the conversion costs and whilst most of this VAT is likely to be at 5%, it may still be a significant sum.

tax rental property

She’s correct!

5. Broken glasses

I work from home as an IT consultant and am constantly staring at computer screens all day. Because of an eye condition, I need glasses with special lenses to avoid inducing a migraine. Unfortunately I accidently broke my glasses yesterday and have ordered replacements, but with the special lenses they will cost £395, can I claim for them as an expense against tax?

Answer

The quick answer will be no in most circumstances, as the HMRC rules are similar to clothing in that the glasses have a dual purpose that relates not only allowing you to see to be able to work, but also to perform all other everyday functions of life. However, if your optometrist will provide you with a letter stating that in his or her opinion, you cannot do the work that you do without them and that they are not essential for the ordinary functions of life, then the cost of replacements will be a valid expense.

Image of David Jones Shrewsbury Accountant and Founder of Morgan Jones

If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.