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May Question and Answer Corner

Newsletter issue - May 07.

Q. Can I treat my buy-to-let property as my main home so it is exempt from capital gains tax?

A. You can only treat your buy-to-let property as your main home for capital gains tax purposes if you actually live in it for a period, so the property cannot be let out at the same time. This period can be quite short, such as a few months, but you do need to have some evidence that you lived there to show the Taxman if he should ask, such as utility bills or correspondence. If you also have another home which you plan to return to you need to make an election to state which property is your main residence.

Q. I have received a leaflet from the VATman that says the flat rate VAT scheme would save me a lot of time and hassle, is this true?

A. Under the flat rate VAT scheme you simply multiply your gross sales (including VAT) by a percentage ranging from 2% to 13.5%, depending on your trade sector, to calculate the VAT you owe the VATman. This may be quicker than adding up all the VAT paid on your purchases, and deducting that figure from the VAT charged on your sales, but it could cost you money. If you are in a sector with a high flat rate percentage, or you have a high ratio of purchases to sales, you may end up paying more VAT to the VATman under the flat rate scheme. However, in other cases you can pay less VAT. Ask us to help you with the calculations.

Q. My mate is starting a new business and wants me to invest. Should I lend him the cash or buy shares in his new company?

A. If the business fails you are more likely to get your money back from a loan than as shares, especially if the loan is secured on the assets of the business. If your loan is not repaid you can claim a capital loss, which can be used against you other capital gains, if you have any. If you subscribe for shares and the company fails you can claim the amount paid for shares as an income tax loss, which is usually better for tax purposes. If the business is very successful you won't make a profit from the loan if the business is later sold for a huge amount, or becomes listed on the stock exchange. To realise those gains you need to hold shares in the company.

 

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What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

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.