Might have made sense to use the balloon payment as the residual value of the car for depreciation purposes so that on handing it back the NBV of the car equals the finance liability (balloon payment amount) and no profit or loss on disposal arises.
Perhaps the numbers in your example are simplified to illustrate the point but should such an arrangement have been treated as a finance lease in the first place?
I would argue there is not a sufficiently close connection between the payment and the service to constitute a supply for VAT purposes, but for Income Tax it is probably a trading receipt as the business model often relies at least partly on these voluntary payments (along with advertising, affiliate links, etc.).
When I have seen Instagram accounts inviting followers to make payments via Patreon it has been clearly stated that in exchange for the payments there is access to content they would not otherwise have access to. Those circumstances I would think do constitute a sufficiently close connection to constitute a supply. Quite what that supply is I don't know.
I would expect it comes down to the facts of each case, many receipts through Patreon are likely voluntary with no supply made whereas many will be for access to some enhanced level of content.
Might have been worth you providing a link to your previous question (as I presume it is the same client, if not a mighty coincidence) which would have potentially saved you the time re-explaining the situation.
Admittedly I haven't had to get involved with useful lives of intangibles so far in my career, but general principles is that costs should be written off over the period they provide a benefit. I.e. if the client thinks people will be buying this E Book (or there will be a market for the rights to it) for 5 years then that would be entirely appropriate.
If sales will be negligible after two years then a much shorter write off period would be sensible.
Therefore when the asset was sold in 2013/14, the proceeds of the sale were paid straight in to the Directors personal bank account.
I particularly enjoy this sentence as it, presumably accidentally, suggests that the proceeds of a company asset sale being paid into the director's personal account is the natural thing to have happened.
You mention that it is part (upper floors) of the properties that are being converted. Do these security costs relate solely to the part under development or does any part relate to the ongoing commercial elements?
Obviously my colleagues will be doing everything necessary to confirm the exact facts of the situation and the client would be taking separate legal advice regarding the possibilities of any unwritten rental agreements / trust deeds before any approach to HMRC is made.
My answers
Might have made sense to use the balloon payment as the residual value of the car for depreciation purposes so that on handing it back the NBV of the car equals the finance liability (balloon payment amount) and no profit or loss on disposal arises.
Perhaps the numbers in your example are simplified to illustrate the point but should such an arrangement have been treated as a finance lease in the first place?
I didn't realise there was a single person in the world that didn't have their Subway toasted!
When I have seen Instagram accounts inviting followers to make payments via Patreon it has been clearly stated that in exchange for the payments there is access to content they would not otherwise have access to. Those circumstances I would think do constitute a sufficiently close connection to constitute a supply. Quite what that supply is I don't know.
I would expect it comes down to the facts of each case, many receipts through Patreon are likely voluntary with no supply made whereas many will be for access to some enhanced level of content.
Might have been worth you providing a link to your previous question (as I presume it is the same client, if not a mighty coincidence) which would have potentially saved you the time re-explaining the situation.
Admittedly I haven't had to get involved with useful lives of intangibles so far in my career, but general principles is that costs should be written off over the period they provide a benefit. I.e. if the client thinks people will be buying this E Book (or there will be a market for the rights to it) for 5 years then that would be entirely appropriate.
If sales will be negligible after two years then a much shorter write off period would be sensible.
Why five years?
I particularly enjoy this sentence as it, presumably accidentally, suggests that the proceeds of a company asset sale being paid into the director's personal account is the natural thing to have happened.
You mention that it is part (upper floors) of the properties that are being converted. Do these security costs relate solely to the part under development or does any part relate to the ongoing commercial elements?
Perhaps Wilson would have provided a different answer had the question been "is stamp duty land tax payable..."
Obviously my colleagues will be doing everything necessary to confirm the exact facts of the situation and the client would be taking separate legal advice regarding the possibilities of any unwritten rental agreements / trust deeds before any approach to HMRC is made.