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Covid-19
Tax on US Covid-19 payment to UK domiciled resident.
My client is a UK resident domiciled taxpayer who has received a US Covid-19 payment as a ‘pandemic hardship pay out’ from the US government and was advised that this was not taxable in the US.
While I am unsure, I assume it was made under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
As the payment is not taxable in the USA, I am just trying to ascertain whether the payment will be taxable in the UK.
I would welcome your readers’ thoughts on this matter.
Query 19,855 – Unsure.
Canal boat
Tax position on renting out a canal boat.
I have just taken on a new client who is in the process of buying a canal boat for about £38,000.
The boat will be rented for canal holidays. These will be managed by a canal boat company that will rent the boat out themselves, sending the owner 30% of gross receipts.
HMRC’s Capital Allowance Manual (CA25100) defines a ship as any vessel that is capable of being manoeuvred under direct or indirect power, so the question of claiming capital allowances arises.
I have also looked at the position over VAT, as she could presumably register for VAT reclaiming the VAT on the barge? I have not checked, but I suspect that the boat company will have a self-billing arrangement in place.
Canal boats are currently holding their value and may well rise given the current economic situation. I have explained that there may be very little if any tax or VAT saving in this situation, especially if she just owns the boat for a short time.
I have never dealt with anything like this before and am a little unsure of my analysis of the situation especially given the commercial arrangement my client is entering.
I have looked into this and found conflicting views about the tax position of renting out canal boats when researching online. I am not even too sure of where to enter the receipts on a tax return.
I would be grateful for any advice from your readers before proceeding further.
Query 19,856 – Sea Dog.
Temporary posting
Non-resident capital gains tax on UK property.
My client is in the army and has been posted to Cyprus for three years.
He will meet the automatic not resident tests for statutory residence purposes, but as he is continuing to be paid by the army will be treated as UK resident for income tax purposes.
He has recently received a substantial amount of money from the liquidation of a family company in the UK, which had UK property as more than 75% of its balance sheet. These properties were sold, so that cash was distributed on liquidation.
I am unclear as to the correct reporting of this gain. I believe that the liquidation of the company would be outside the scope of capital gains tax unless my client returns to the UK in less than five years, but is the disposal caught by the non-resident capital gains tax (NRCGT) rules for UK property in this case?
I look forward to receiving replies from readers.
Query 19,857 – Adviser.
Enquiry
VAT enquiry on input and output tax errors.
One of my clients manufactures furniture and it has come to light that there are big output tax errors on her last four VAT returns.
My client receives an order to make, say, a special oak table, and the customer will pay a non-refundable 50% deposit before the work starts, which she correctly treats as inclusive of VAT. At the end of the job, the customer pays the balance owed and my client raises a tax invoice for the full job. The error is that my client has posted the full amounts of VAT on her sales invoices to the VAT control account, double paying output tax on the initial 50% deposit.
My client recently submitted a repayment return, which has been queried by HMRC. And it has come to light that she has made the same error with payments to her suppliers, in other words claiming input tax on deposits and also on the full value of the purchase invoice subsequently raised by the supplier. So, input tax has been overclaimed by £30,000 on this VAT return and output tax overpaid by £8,000.
My question is whether I should alert the officer to the output tax errors in the earlier periods – he is only checking the current period – or should I instead do a VAT652 error disclosure as we found the errors before he started his enquiry? And will the officer treat the input tax error as careless and subject to a penalty?
Readers’ thoughts would be appreciated.
Query 19,858 – Double Jeopardy.
