May Questions and Answers

Newsletter issue - May 2022

Q. I am the director of my own company incorporated 15 months ago. The business has expanded such that I have taken on a bookkeeper. Whilst preparing the information required to give to my accountant at the year-end, my new bookkeeper has found a batch of sales invoices that I issued soon after registration but inadvertently did not include VAT. Can I now issue additional invoices to correct the VAT error?

A: Mistakes happen and this scenario is not uncommon such that HMRC has a set procedure for dealing with such circumstances. The invoice you give to your customers must state if it is inclusive or exclusive of VAT. Legally this means that if your invoice does not show VAT then you cannot later demand payment from the customer. Therefore, if you fail to charge or charge the wrong amount of VAT, you are liable to make up the shortfall. Any shortfall of VAT must be declared on the return for the period in which the error is discovered. If the total amount for all errors is less than £10,000, or less than £50,000, and 1% of the outputs figure (Box 6 on the VAT return), the correction is made by including an adjustment on the next VAT return. If the amount is more, notification is via completion of form VAT652.

Whether you can recover any of this underpayment from your customer will probably depend upon the goodwill of that customer and their own VAT registration status. Should your customer be VAT registered they may be willing to make the payment as they may not be worse off if payment is made. A non-VAT registered customer will have an extra bill to pay although they may be able to deduct that payment from their profit for tax purposes if they are in business.

Q. In 2020 I entered into an agreement to purchase the leasehold of a commercial property that was under construction in exchange for a premium of £500,000. The agreement stated that a 20% deposit was to be paid plus a 10% stage payment 12 months later with the balance on completion. Unfortunately, my business folded due to Covid and I defaulted on the later stage payment. This was deemed a breach of the agreement, the contract was never completed and the builder kept the deposit.Can I claim a capital tax loss in respect of the lost deposit?

A: Unfortunately not - a capital loss can only be claimed where there is a disposal, or deemed disposal, of a chargeable asset. In this case, the terms of the contract were not adhered to, so you could not take possession of the underlying asset so no loss can be claimed.

Q. I live within walkable distance of a train station with a direct route into London. I work locally and drive to work so the drive is not used in the daytime. What are the tax implications if I rent out the drive?

A: Under the Property Tax Allowance rules, if total income from letting out the drive is less than £1,000 in the tax year, the whole amount is tax-free and does not need to be reported to HMRC.

Where property income exceeds £1,000 in the tax year, you have one of two choices - either:

  1. deduct the £1,000 allowance from the receipts and pay tax on the excess; or
  2. work out the profit or loss in the normal way.

The option as to which is the more beneficial will depend on the level of the expenses.

If receipts exceed expenses, but expenses are less than £1,000, the best result is to claim the property allowance and pay tax to the extent that income exceeds £1,000. If expenses are more than £1,000, the best result will be obtained by working out the profit in the usual way, deducting allowable expenses from receipts.

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."


  • "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

Request a Callback
Please complete our form
to request a callback
Get a Fixed Quote

Competitive fixed quotes
for agreed services

Find out how to Make more, Keep more and Work less

Increase your profit and
reduce tax liabilities

Your Business Size?

Expert advice for your
business size



Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: