June 2022

If you’re buying a single supply which includes goods and services, e.g. building work, from an unregistered trader, negotiate with the supplier to acquire the goods direct. That way you can reclaim the VAT on the cost of these which would otherwise be hidden in the overall price for the job and so not recoverable.

All expenditure apart from that on furnishings and equipment for use by the tenant qualifies for tax relief. Generally, expenditure on repairs and redecoration is tax deductible from rental income while that for structural improvements is deductible when calculating capital gains or losses when the property is sold.

If you or your spouse have previously been widowed it’s possible to use the transferable nil rate band (NRB) from one or both of the previous spouse so that three or four NRBs can be claimed. A discretionary trust can be used to create entitlement to an extra NRB.

The First-tier Tribunal (FTT) recently considered whether money from property sales was trading income or capital gains, and if private residence relief was due. The FTT ruling provides useful guidance on both issues.

You can reduce your income or capital gains tax (CGT) for the year before your investment in a tax incentive scheme with an enterprise investment scheme (EIS) or seed enterprise investment scheme (SEIS). This isn’t available for venture capital trust (VCT) investments. Income tax relief for each is equal to 30% of what you invest but EISs and SEISs provide CGT and inheritance tax reliefs which VCTs don’t.

HMRC has updated its guidance on the new penalty regime, which will apply to VAT accounting periods commencing on or after 1 January 2023. It says that during the first year of the new rules it will waive the penalty that applies.

Writing off an overdrawn director’s loan account can be more tax efficient than paying extra salary to cover it and has a cash-flow advantage. The trouble is HMRC may argue that NI is payable, which makes it inefficient. Pay a dividend to cover the debt instead; this has the same advantages as a write-off with no NI risk.