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Roll up, roll up
How much must be reinvested for a valid rollover relief claim?
I have been appointed to act for a client who is self-employed. In late March 2016, he sold his business premises for £750,000. There was a gain of £350,000 and his previous accountant claimed rollover relief on the 2015-16 tax return. I am not entirely sure of the advice given at that time, but the client did understand that he had to reinvest in new business assets within three years. The question is ‘how much?’
While discussing his accounts recently, the client told me that he bought another business property in December 2018 for £400,000 and was assuming that he had done what was required and that the gain was therefore rolled over, but is that correct? When I suggested that this might not be the case, the client appeared – to say the very least – surprised.
Can Taxation readers advise me of the position here? If I am correct, what are the tax implications and is there anything that can be done to mitigate any liability?
Query 19,327– Barnum.
Separate disposal?
VAT payable on barn conversion.
I act for an electrical contractor who has been engaged to do work for a customer who is self-building his own premises.
The property in question is a barn conversion. I do not have all of the relevant details but from what my client has told me the planning required that only one wall was to be removed at a time, while foundations were dug and then the wall rebuilt in stages.
My client initially said this is a new build therefore we should zero rate it, at which point I said that we needed to consider this further.
I believe that as this is a barn conversion (and we are unlikely to be able to treat it as a new build), it should be a conversion from non-residential to residential and my client will charge 5% VAT.
However, I also have concerns that the property being converted is on the same site as other buildings, including the owner’s existing home. I do not know the overall situation but my concern is that the planning will not allow separate disposal of the barn conversion. I know that on a new build this replaces the normal rule of zero-rating building work but does the same apply with this conversion?
Readers’ thoughts would be appreciated.
Query 19,328– Farmer Giles.
Tangled web
Reliance on information contained on HMRC’s website.
When preparing my company’s capital allowance claim for the year ended 31 December 2018, I consulted the HMRC website to confirm the CO2 emission levels to allocate the company-owned cars between the main pool and the special rate pool.
The capital allowances section on the website (tinyurl.com/HMRC-88524) states clearly that, for cars purchased after April 2015, the main rate should be claimed for cars with emission levels between 75g/km and 130g/km. My company has always insisted that all cars are below the 130g/km so that the main rate allowances can be claimed.
I was disappointed to learn that, from April 2018, the upper limit for the main rate pool is 110g/km. Apparently, FA 2017 implemented a policy paper published in November 2016.
Consequently, my company has bought cars expecting that they would be eligible for the main rate pool, but which will no longer qualify.
I accept that the website is not the law, but surely an innocent taxpayer is entitled to rely on factual information such as rates and limits. Luckily, I noticed the problem before submitting the capital allowances claim, but what would the position have been regarding penalties and interest if I had not?
How many taxpayers are making incorrect claims based on this out-of-date information? And is there an accurate source of information?
For cars already purchased, does the main or special rate apply and is there anything that can be done to mitigate matters? I am starting to wonder whether the company should trade in its higher emission cars, for lower emission vehicles, but perhaps this might be counter-productive?
I look forward to hearing thoughts from Taxation readers.
Query 19,329– Dated.
French imports
Is a VAT number required in France as well as in the UK?
My client used to work for a company that bought car parts from suppliers in Taiwan and sold them to various UK and overseas business customers. He has now started trading in the same market, using the same main supplier in Taiwan as his previous employer.
My question relates to VAT. The client has agreed an order with a French-based business for €7,000 – the customer will also be responsible for paying any customs duty when the goods arrive in France from Taiwan (they will never enter the UK). My client will be charged €4,000 by the supplier, giving him a healthy profit on the deal.
On the basis that all his customers are in business, my client registered for UK VAT on a voluntary basis two months ago and has already issued the invoice to the French customer, even though the goods are still stored in Taiwan. He has shown the invoice as ‘zero rated’ as far as UK VAT is concerned because the customer is VAT registered in France. But I suspect this is too simplistic and my client might need to get a VAT number in France.
Can Taxation readers advise?
Query 19,330– Component Man.
