Q. My company was late submitting its VAT return and payment for the quarter to 30 September 2009. The VAT office has sent a surcharge notice, but the

A. If there were some exceptional circumstances that contributed to the late filing of your VAT return and payment, such as a death of a close family member, or a fire at your company premises, you may well have a reasonable excuse. In this case you should ask for the surcharge to be reviewed, but you need to do this within 30 days of the date of the letter from the VAT office. The reviewer will overturn the surcharge if they agree you had a reasonable excuse for late filing. You should provide a full written explanation of the circumstances that caused the delay, including any independent evidence you have, such as a report from the fire service.

Q. I was born in Croatia but I've lived in the UK for 20 years. I recently inherited an apartment in Croatia which is let out. Do I need to pay tax in

A. As you were born in Croatia your home country is outside the UK, and you probably have the tax status known as 'non-domiciled'. This is not certain as your domicile for tax purposes depends on a number of matters, including whether you intend staying in the UK in the future. If you are non-domiciled you may be able to ignore your overseas income for UK tax purposes, if the total income and gains left outside the UK each tax year amounts to less than £2,000. However, you must include on your UK tax return any overseas income or gains you bring into the UK, known as a 'remittance'.

Where your overseas income and gains amounts to more than £2,000, you currently have a choice:

pay an annual £30,000 tax charge and ignore your overseas income (which remains overseas) for UK tax purposes; or

declare all your overseas income and gains on your UK tax return.
This a very complicated area of tax and you should discuss your personal circumstances with us before deciding what to include on your UK tax returns.

Q. I've just realised I missed £280 of income off my tax return for 2008/09, which I submitted online in January 2010. What should I do?

A. Although this is a relatively small amount you should correct your tax return for 2008/09. However, before you do so double check that you have also included all the expenses and deductions for that tax year, as it looks bad to the Taxman if you correct your return, or 'amend' it in tax-speak, more than once. As you filed your return online you can also amend it online, just log into the self-assessment online area of the HMRC website and pick your 2008/09 return to amend. You have until 31 January 2011 to do this. You may have some more tax to pay for 2008/09 if your extra £280 of income is not covered by losses, allowances or expenses. You should pay the extra tax due as soon as possible as interest will be charged from 31 January 2010.

Adding Overseas Purchased to Sales

If your business is not VAT registered you need to keep a 12-month rolling total of your sales ('taxable supplies' in VAT-speak), to check this total does not exceed the VAT registration threshold (currently £68,000). Taxable supplies are those sales which would be subject to VAT (at 0%, 5% or 17.5%), if your business was VAT registered. Once your 12-month taxable supplies total exceeds the VAT registration threshold you must register your business for VAT within 30 days.

Unfortunately you now also need to keep track of the value of the services you purchase from any overseas businesses. Since 1 January 2010 most overseas services supplied to a business from another business (B2B) are subject to the reverse charge. This means you as the customer need to act as both the supplier and customer for the transaction for VAT purposes.

You must add the value of the overseas services acquired to your total purchases, and add the same value to your taxable supplies total, for VAT purposes only. The addition of the overseas services to your taxable supplies total may push this figure over the compulsory VAT registration threshold, in which case you must register your business for VAT in the UK.

It doesn't matter whether the business you are purchasing the service from is registered for VAT or not. You still have to apply the reverse charge treatment to the value of the service acquired. There are some exceptions for services relating to land and transport. Please ask us if you are uncertain about when you should apply the reverse charge or register for VAT.

Is Interest on Corp Tax Allowable?

Q. My company has paid interest on late paid corporation tax. Is that interest tax allowable?

A. Yes. Interest paid to the Tax Office on late paid corporation tax is tax allowable for the company for the period in which the interest was paid. Likewise interest paid by the Taxman because corporation tax has been paid early, or in excess of the amount due, is taxable.

Errors in New PAYE Codes

The Taxman has started to issue the 2010/11 PAYE codes, for the tax year that starts on 6 April 2010. This code arrives in the form of a P2 notice, and a copy should go to your employer (on a form P9). If you have received your 2010/11 PAYE code already please study it carefully, as any corrections need to be made in the next few weeks.

Since the Taxman fired up a new PAYE computer last summer there have been a number of faults appearing in PAYE codes. In some cases the age allowance or married couples allowance disappeared, in other cases the state pension amount was understated. Now many of the 2010/11 codes have excluded some of the basic personal allowance, which should be £6,475 for those aged under 65.

This fault occurs if you have changed jobs in the last few years, or started to receive a pension.

The Taxman's computer thinks you are still receiving a wage from your old job, so has split your personal allowance over your current employment or pension and your old job. If you do not have your full personal allowance of £6,475 shown on your 2010/11 PAYE code, ring the Tax Office to ask why, or speak to us

Transfer Investment Property to Stock

The property markets in all sectors have been through terrible times lately. A number of businesses, which were set up in the good times to invest in let property for the long term, have been forced to sell some properties to generate enough funds to cover costs.

Where the property investment business starts to develop properties for sale, rather than keeping them for long term letting, the business has started a trade of property development. In this case where a property, previously held as an investment, is transferred to the "stock pile" as stock ready to be sold, the property must be treated as if it had been sold at its open market value at that point. This can create a capital gains tax charge, or a capital loss, before the property has actually been sold.

To avoid this difficulty the business owners can make an election to treat the value of the property when it enters the stock pile, as the value when it was acquired by the business. Any gain or loss will then only arise when the property is sold by the business. This election must be sent to the tax office within two years of the end of the accounts year for a company, or by the first anniversary of 31 January following the tax year end for an unincorporated business.

The advantage of making this election is that the loss, if one arises, becomes a trading loss made on the sale of stock by the business rather than a capital loss. Generally a trading loss can be set-off against a wider range of income than a capital loss. However, to use this trading loss the Taxman will have to be convinced that the property business has actually started a trade of property development, and is not simply selling off its surplus investments.

This can be a very difficult area and full advice is essential so please contact us for advice in your own circumstances.