Shrewsbury tax accountant answers five of your questions
As it has now been four months since I’ve posted a Blog on some of the more interesting and sometimes bizarre questions asked by clients and readers of the Blog, here’s today’s selection:
1. Why can’t I claim my VAT back?
I run a small social media services company and we supply a Wi-Fi a customer tracking service to a client that owns a shopping arcade. This gives the client data on which shops people go into and gives feedback to retailers so they can adjust their offerings/target certain customers. My problem is that HMRC have told me that there should be no VAT on these services as they are ‘land related’ and therefore exempt. The implication of this advice means that I can’t claim back VAT on any related expenses and equipment. Do you have any thoughts on this as it sounds wrong to me?
Answer
The service you supply is clearly vatable in my opinion; there could be an exempt supply of land if, say, your company supplied a site for advertising, but it appears that HMRC have misunderstood the situation. I would write to them, supplying as much information as possible and ask for a written ruling.
2. Do I have to charge VAT on my yacht?
My modest family-run UK limited company (VAT registered) owns an asset (a yacht) which is located overseas in the EU. We plan to sell the asset to a UK based person who will not bring the asset back to the UK, so my question is will we have to charge 20% UK output VAT? Any thoughts appreciated, thanks.
Answer
The quick answer is no, as the place of supply of goods is where the goods are at time of sale, so if the goods are in the EU, then the sale will not involve UK output VAT. However, as the yacht is in an EU location, the default position is VAT registration is required in that location…..but there are ways around the rules.
3. Is my bra tax deductible?
I am a personal trainer and fitness instructor. My bookkeeper tells me that I can’t claim for my sports’ bras, leotards, sweat-bands etcetera as they are not clearly workwear and can be used for none work related activities. This seems a bit harsh, is she correct?
Answer
Strictly speaking she is correct, however there are exceptions to this rule and as you are registered with HMRC as a personal trainer/instructor, then you can claim for both the cost of washing your workwear, as well as the full purchase price in the year that you bought the item.
4. Is a replacement roof capital expenditure or a repair?
I run a six bed B&B in the Lake District and the roof was in a very poor state, so I replaced it as otherwise I’d have had to close my business. The roof, which hadn’t been altered in any way, was the original roof from circa 1970 and to repair it properly would have cost a similar amount to a new one. For tax purposes, I consider this to be a repair not capital expenditure. Am I right, or am I missing something?
Answer
I agree that it does appear to be allowable expenditure and you have a choice, either to fully claim the cost against income in the year of expenditure, or to treat it as capital expenditure and claim capital allowances over a number of years
5. Interest earned vis a vis a trading loss.
My husband and I run a small property rental company (5 houses with no borrowing). In the last tax year, we suffered a modest trading loss due to a couple tenants not paying their rents for several months. We also hold significant capital reserves and earn a decent amount of interest. I would like to know if the interest can be set off against the trading loss.
Answer
Your question would suggest that you run your business via a limited company and assuming that to be the case, providing that no interest or other finance have been included in calculating it, then it is a property business loss which may be set against the interest income accrued.
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.