Self Assessment and VAT loss

kelliefletcher91

Hi all,

Wonder if someone could help, last year I took over the paperwork of my other halfs Carpet fitting business - he wasn't to good at the paperwork side and I discovered he'd gone over the VAT threshold 4 months previously. I sorted all of that out and we are now sorted as far as VAT goes, my question is although we managed to get some of the VAT back from VAT registered businesses he supplied to we also had to pay some out of our own pocket as there were private customers as well, can we claim this as a loss in our Tax return?

Also he uses half the garage as storage can we claim rent of this space?

Any help or advice appreciated - could do with reducing the Tax bill as we've spend the last 7 months trying to pay of all the VAT!!!

fengirl_2

The VAT paid out of your own pockets is shown as capital introduced in the balance sheet. You cna include a deduction for the rent of the garage, but you then need to include this as personal income on your self assessments.

Merlin_Accounts

Hi Kelliefletcher91

Re the VAT first. If the VAT errors relate to a period for which you have already filed a self assessment tax return you could file a return amendment restating the figures that were affected. If we are talking about figures that appeared on the 2007 self assessment tax return you will have until 31 Jan 09 to file an amendment. The easiest way to do this is to send a letter to the tax office stating that you are amending the return (and why), and then list the box numbers affected. You would need to redo the tax calculation too, but at least then you would get back any tax you overpaid as a result of this (and quite quickly too). If it is the 2008 return and you have already filed you have until 31 Jan 2010 to file the amendments. Bottom line, you are indeed entitled to tax relief on the net VAT due (but not on nay penalties they may have charged).

If the VAT errors go further back you can lodge an error/mistake claim, in the form of a letter, though this could give rise to the tax office starting an enquiry into the relevant return.

Re the garage - generally speaking you should not charge rent BUT if the business is owned by one of you but the home (and garage) is owned jointly then there may be some tax savings to be had - the rent reduces the business profits so gets tax and class 4 national insurance relief at 28% of the amount of rent charged; the rental income as it would become would then be assessed equally on you both (half each) and, provided neiher of you are into higher rate tax, then at worst it will cost you 20% in tax (though you could claim some expenses against the rent, such as a proportion of the mortgage interest, property insurance etc..)