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October Question and Answer Section

Newsletter issue - October 2010.

Q. As I was made redundant last year I decided to take time out and build my own house. A neighbour told me I could claim back the VAT on my costs, even though I am not a VAT registered builder. If that is true, how do I go about claiming?

A. You can reclaim VAT correctly charged on your building materials and on most of your building services, using the VAT refund scheme for DIY builders. The claim form for new builds under this scheme (VAT 431NB) can be downloaded from the HMRC website, but be sure to also read the guidance notes. There is a different form (VAT 431C) to use where you are converting a property rather than building it from new. In either case you can't reclaim the VAT charged on professional services connected with the build, such as architectural or legal services. We can help you compile and submit your claim to the VAT office.

Q. A large UK company has made a late payment of fees owed to my company. They paid interest on the late paid amount, as they are required to do so under the contract, but they deducted tax from that interest. How do I deal with that tax in my accounts?

A. Your customer should not have deducted tax from the interest it paid, as both parties involved in the transaction are UK resident companies trading in the UK. Companies used to have to deduct income tax from annual amounts of interest paid, but that requirement was removed from 1 April 2001 where the recipient is a UK company. Ask your customer to pay you the amount of interest it has withheld as 'tax'. We can provide a longer explanation of the legal position if you need it.

Q. I have received several emails recently from organisations claiming I could use an employee benefit trust (EBT) to reduce tax. Is this a scam, or is there something in it?

A. In outline a lot of EBT schemes work like this: the company pays money into the EBT and employees of the company receive a loan from the EBT in place of all or part of their salary. The employees pay tax on just 4% on the loan per year. This all sounds good, but there can be various problems in practice. Some schemes are more aggressive than others and you should be prepared for the Taxman to look very closely and try to challenge such arrangements. They are not for those not willing to take some risk and you should be made aware of all the risks involved before proceeding.

 

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Dakins Property Services

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Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.