July 2016 Questions and answers

Newsletter issue - July 2016.

Q1. My mother died last year and left my brother and me a commercial business unit. Probate is nearly complete now. If we sell the property in the future, what are the capital gains tax implications on the sale?

A: I presume that you and your brother are inheriting equal shares in the property. Your acquisition value, for future capital gains tax computation purposes, is the market value at the date of death - known as the 'probate value'. Capital gains tax will be calculated under the normal rules on any increase in value from that date.

Q2. I have recently registered for VAT. I am not very good when it comes to administration and I have heard that the flat rate scheme might help me. How does the scheme work?

A: Broadly, the flat rate scheme for VAT is designed to help small businesses with a turnover of no more than £150,000 a year, excluding VAT, by taking some of the work out of recording VAT sales and purchases.

With the flat rate scheme:

  • You pay a fixed rate of VAT to HMRC; and
  • You keep the difference between what you charge your customers and pay to HMRC; but
  • You can't reclaim the VAT on your purchases - except for certain capital assets over £2,000.

The percentages applicable to this scheme currently vary between 4% and 14.5%, depending on the nature of the services provided. Full details of the scheme are included in the HMRC VAT Notice 733: Flat rate scheme for small businesses, which you can download from the HMRC web site.

In your first year of VAT registration you get a 1% reduction in flat rate, which means that you can take 1% off the flat rate you apply to your turnover, until the day before your first anniversary of becoming VAT registered.

The scheme works well for some but not others. On the positive side, the scheme may save you some admin because you don't have to work out every item of input and output tax, but if your customers are VAT registered, you do have to calculate the VAT and issue VAT invoices in the normal way. Financially, the flat rates averages may work out cheaper for you than normal accounting or you may find this scheme more expensive.

Q3. I have a part time job and I earn about £8,000 a year. As my earnings are less than the tax-free personal allowance, can I transfer the unused amount to my husband?

A: Since April 2015, a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year may transfer part of their personal allowance to their spouse or civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. The transferor's personal allowance will be reduced by the same amount. For 2016/17 the amount that can be transferred is £1,100 (£1,060 for 2015/16). The spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £220 for 2016/17 (£212 for 2015/16). Note, however, that married couples or civil partnerships entitled to claim the married couple's allowance are not entitled to make a transfer. For further information on this, see the gov.uk website at www.gov.uk/marriage-allowance.

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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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk