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Many happy returns
Difficulties with the self-assessment tax return.
As a professional accountant for many years it is with some embarrassment that I have to say I can hardly understand a self-assessment tax return (form SA100). I would also suggest that none of my clients can, most of whom cannot even locate the signature page.
It seems to me that it would be far better if I just printed out a schedule of data showing the various sources of income with details of account numbers and asked clients to sign that as a proxy for signing form SA100. This would have the advantage that both the client and the accountant would easily understand the information contained in the return.
Would this be acceptable to HMRC and my professional indemnity insurers?
Query 19,435– Old Hand.
Question of ownership
Capital allowances on personal computer and van.
I am facing two different situations with two small owner-managed companies. I believe that the technical grounds and principles are the same for both.
Cliff, a sole director and shareholder of his plumbing services company, wishes to acquire some £2,000 worth of computer equipment to be used by the company in its business.
Because the company is currently short in cash, Cliff suggests that he buys the equipment personally and then introduces it into the company. The company will repay him for the purchase when funds are available.
Eric, a sole director and shareholder of his electric services company, wishes to acquire a commercial van to be used by the company in its business.
Since the company was only recently incorporated and does not have an established credit rating, he is struggling to find a hire purchase deal . Eric has suggested that he will take out the hire purchase arrangement himself and then introduce the van into the company.
In both scenarios, the assets can be introduced into the company by way of a gift or a sale at cost. Alternatively, the very acquisition by the director might be regarded as being ‘in trust’ for the company.
In respect of the nature of the assets in question, both the computer and the van appear to qualify for capital allowances and for the annual investment allowance for plant and machinery.
However, my attention is drawn to CAA 2001, s 214 and s 217 which provide that no annual investment allowance is available for acquisitions from a ‘connected person’, and to CAA 2001, s 11(4) which provides that the person incurring the expenditure must own the asset.
How could the assets be brought into the company while preserving eligibility to 100% annual investment allowance capital allowances?
Can readers provide assistance?
Query 19,436– Capitaliser.
Optical confusion
Availability of consortium relief for company group.
My client company (A) owns 80 out of the 100 issued shares of B Ltd. The other 20 shares of B Ltd are held by another company (C) which has no connection with company A.
All three companies are UK resident trading companies: company B has only one class of ordinary share capital and no other shares in issue. On the face of it companies A and B are in a group relief group and if one makes a trading loss it can be surrendered to the other in the usual way.
However, there is an option in place under which A Ltd has granted an option to C Ltd to acquire 10 of the shares it holds in B Ltd. Were that option to be exercised A Ltd would hold 70% of B Ltd and C Ltd would hold the other 30%.
My understanding is that for group relief purposes the option has to be taken into account in determining whether there is a group, so A Ltd will be treated as holding only 70% of B Ltd while the option subsists. That means that even though the option has not yet been exercised, group relief between A Ltd and B Ltd will not be available.
My question is whether or not that rule also carries through to consortium relief. At the moment, the actual shareholding (80-20) means that there is not a consortium (CTA 2010, s 153(1)(2)). But if I have to take the option arrangements into account for group relief purposes can I also take them into account for consortium relief purposes, so that I get a 70-30 shareholding, which would create a consortium?
It would seem odd to have a situation where two companies between them hold 100% of the share capital of a third company but where neither group relief nor consortium relief is available. So, it would make sense in the situation here that consortium relief was available. But the legislation is complex and I would appreciate the views of other readers who are more familiar with such a situation.
Query 19,437– Relieved.
VAT registered
Dealing with VAT on outstanding account.
I have accrued an expense in a set of accounts of a VAT registered client. This expense creditor is also VAT registered.
In this scenario, I have the following questions.
- Is it correct that VAT only becomes an issue once the creditor raises an invoice for the accrued expense or money paid?
- Would an agreement to ‘set off’ a loan my client made years before the ‘creditor’ was engaged for ‘services’ to the client’s business be treated as the payment of money in the ordinary way?
I look forward to help from readers.
Query 19,438– Confused.
