Q. I registered as self-employed in 2005, but as I didn’t have any income I ignored the tax returns the tax office sent me. When they demanded £1,000 tax for each year I got my act together and sent in the completed tax returns which showed no tax due. Now the Taxman won’t cancel the tax demands issued for the years before 2008/09. What can I do?
A. You have been caught by the tax law here. The years before 2008/09 are ‘out of time’ and the Taxman doesn’t have to cancel the tax demands for those years. Although you may be able to appeal for the tax demands to be cancelled under ‘special relief’, but you need to show it would be unconscionable for the Taxman to collect the excessive tax. This is a very high hurdle to clear.
Q. From 1 January 2013 Independent Financial Advisers (IFAs) are not permitted to charge commission, and should instead charge fees for the advice and services they provide. Do firms of IFAs have to charge VAT on all the advice they give or is some advice exempt from VAT?
A. The VATman’s guidance says the IFA’s advice-only services will be subject to VAT, but if the fee is for an introduction to an exempt financial service, that introduction fee will be exempt from VAT. As an IFA you need to sort out exactly what you are charging for:
- general advice
- introductions to exempt services (such as to authorised dealers in securities) or
- introductions to services which are subject to VAT such as discretionary investment manager services.
We need to discuss your particular circumstances in detail to sort out the VAT position.
Q. I got divorced in 2007, but I still jointly own my former family home with my ex-wife. We agreed she would live there with my daughter until she finished her school exams. The house is now about to be sold. Will I have to pay capital gains tax on my share of the profit made?
A. You can escape tax on the gain made on your former home if all these conditions are met:
- Since you left the property your former spouse has occupied it as her main residence.
- The agreement for your ex-spouse to stay in the home was made either under a court order, or as part of your divorce.
- You haven’t elected for another property to be your main residence for any part of the period since you ceased living in your former home. If you have acquired another property in the meantime, you need to think carefully about which property you claim capital gains tax relief on, as this relief can’t be applied to two properties for the same period.