Member Since: 9th Jul 2015
9th Sep 2020
Tax Dragon wrote:
Applying all of this to the OP's case…
1) it's quite possible that the annexe (which was built to let) is excluded by s224(1) [therefore not covered by s223B]
2) but the adjustment, if any, for the bedroom (which may, say, have been unoccupied when bought, then let, then sold unoccupied) would be under s224(2) [and if so the corresponding gain covered (or partly covered) by s223B].
(I'm not saying that's right; just that it seems to be possible and that there could be different treatment of the two let spaces.)
Thanks very much for the response Tax Dragon.
Your answers have confused me though. You seem to be saying that the annex would not qualify for letting relief under s223B due to s124(1) being in play, but the single room would fall under under S124(2)?
Given what Richard said I was not concerned about s124(1) at all, but your mention of S124(2) has worried me more for the annex as it was a conversion of the existing garage, although I still don't see how that makes a difference provided the annex is not a sperate dwelling (which it isn't)?
8th Sep 2020
Richard, thank you so much for that detailed reply.
And your reply has caused me to delve further and I can now see what I have done.
The original draft legislation for the new lettings’ relief proposed the new condition as follows.
(a) part of the dwelling-house is the individual’s only or main residence, and
(b) another part of the dwelling-house is being let out by the individual as residential accommodation otherwise than in the course of a trade or business.
But your post has prompted me to look at what was enacted in the Finance Act 2000, and in that legislation, the “otherwise than in the course of a trade or business part has gone.
So I am a fool, but problem solved I think?
One last issue revolves around the lodgers versus letting relief. I was aware of SP14/80, but HMRC indicate in their manual at CG64702 that “A distinction was intended by the Statement of Practice between a person who takes a single lodger into their home and a person who is running a lodging house as a business. The relief available to the latter should be restricted. You should not consider any restriction of relief where there is a single lodger but should consider doing so to an appropriate extent where there is more than one lodger, whilst bearing in mind that if relief is restricted lettings relief may be due”.
So, it seems to me that when there is only one lodger resident, PRR does not need to be restricted, but whilst there are 2 lodgers, I should go down the letting relief route which still remains available?
Sorry again for posting out of date info about the new letting relief provisions.
8th Sep 2020
Surely they are engaged in a UK property business?
That being the case, to the extent the dwelling is used exclusively for that business (the annexe and bedroom) PPR relief is denied owing to s.224(1).
This is where s.223(4) steps in and saves the day [to the ‘usual’ limits] in respect of the “chargeable gain by reason of the letting”.
I don’t see that this scenario is impacted by the 6/4/20 changes.
Thanks for the response, it is much appreciated.
The annex isn't a seperate dwelling but it was likely built to rent out, so I guess it does sound like a property business (it is the annex that was causing me to question this whole thing).
If that is the case, though, surely the 6/4/20 changes do bite, in that lettings relief would have been available pre 6/4/20 but is now no longer available as s.223(4) has been omitted/amended and is now only avaliable when:
(a) part of the dwelling-house is the individual’s only or main
(b) another part of the dwelling-house is being let out by the
individual as residential accommodation otherwise than in the
course of a trade or business.
29th May 2020
Very; thank you; and thank you to John too.
I guess my uncertainty is regarding whether HMRC could ever argue a dividend was still subject to the bed and breakfsting rules i.e. because they considered it to be paid out in cash.
Seems like ensuring the dividend is always credited to the loan account (even if then paid out) makes it pretty watertight.
21st Mar 2020
My quarterly returns are March & June. Does this mean that I don’t make my 07/05 payment NOR my 07/09 payment (liability accumulated?)
I am slightly confused (not hard) about the wording of the following:
Quote:The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.
I read that to mean VAT liabilities that fall due between 20 March 20 and 30 June 20 can be deferred until the end of 2020-21.
Does that mean that VAT liabilites for May 20 quarters and beyond will have still have to be paid on time (because they fall due after 30 June 2020); is that correct?
12th Jan 2020
Many thanks for all the responses.
The lender is unaware of the £50k “issue”. The initial borrowing applied for was £20k to fund legitimate new equipment for the business. When the P2P saw the accounts, projections, etc they immediately offered £100k; this is a successful and profitable business. Director knew he had personal tax, etc to pay so, without thinking, just went for it.
With regards to the £30k / £50k split, the previous accountant initially had it all as dividends in the draft accounts and then suggested the £50k adjustment.
With regards to the “unlawful” dividends, they were unlawful I believe as they were based on draft accounts showing huge negative reserves and were pointed out in writing to the Director. I wanted to reverse them as part of the Prior Year Adjustment because i) I am worried that HMRC could attack these as salary rather than dividends, plus ii) as he is still in time to refile last years pesonal tax return we could get the tax back he paid on these. I realise ,though, that this would raise even further alarms with HMRC.
It does sound like the best way to go is:
• PYA or refiled accounts for the £50k.
• Refile CT return with DLA overdrawn.
• Keep the £30k dividends as they were declared.
• Director borrows money to repay the £50k DLA.
• Director takes reduced drawings/dividends going forwards to enable the negative reserves to be eliminated.
Any other suggestions and comments would be very welcome.
[And you don’t even want to know what has happened with MTD and VAT when the Director took over doing the VAT returns and used Xero to file them, but I will give you an example - he treated some of his "drawings" as salary inclusive of 20% VAT, which he then claimed back in the VAT returns - Happy Days].
24th Oct 2019
To be safe, you could just reverse charge the gross amount.
I don't think there is a definitive answer to this as a reverse charge applies on B2B transactions and as far as LI are concerned this was B2C although your company might consider it B2B.
Unless you are partially exempt it won’t make a difference to your VAT liability.
[Willing to be contradicted on this though].
24th Oct 2019
Your company is a business. They supply Linkin with their UK VAT number, Linkin then charge no VAT and the company must use the reverse charge. VAT MOSS is not used for B2B.
The employee is not a business. Linkin must therefore charge the employee VAT via VAT Moss (as the sub is a B2C digital service ).
24th Oct 2019
I would imagine Irish co is charging VAT at UK rates via Irish VAT MOSS as their customer (the employee) is UK based and not a business.
My understanding has always been that, although the VAT is being charged at a UK rate, this VAT cannot be reclaimed on a UK VAT return.
11th Jul 2019
Looking into this a bit further it looks like it is the FRS 105 micro format accounts that don't have line-by-line tagging of the detailed P&L.
The FRS 102 format accounts do have proper tagging of the detailed P&L.
Don't know if that is a bug with Taxcalc and FRS 105.