March Q&A
Can a director take a company vehicle out of the business to sell?
Q. A company director bought a car through his business on finance, it has been a company vehicle for a few years. The finance is now paid off, and he would like to sell it, but as the business is VAT registered, he would need to sell it with VAT included.
Can he transfer ownership into his name, and account for the equivalent value as a dividend and then sell the car privately without VAT?
A. As a shareholder of the company and a director or employee, he would be taxed on the transfer of the car under the employee benefit rules and not as a dividend.
The business would need to charge him VAT on this transfer. So, he could do what he proposes but he would not gain from doing so.
Should we run our motorhome rental business as a limited company?
Q. My husband and I are about to start a motorhome rental business and are considering running it as a limited company. The van will be rented through an agency and will be available all year, however, if it has not been rented, we may decide at the last minute to use it ourselves. Is HMRC likely to treat it as being available for personal use from a benefit in kind perspective even though we are not using it?
A. While the motorhome is available for rent, it would also still be available for personal use. HMRC states ‘A car or van is not made available by reason of employment where the employer’s normal business is the hire of cars or vans and the employee hires the vehicle on the same terms as a member of the public’.
Will there be capital gains on selling part of our garden?
Q. We are selling a part of our garden as a plot of land. Do we have to pay capital gains tax on the plot?
A. If you are currently using the land being sold as part of the garden of your house, the rules for principal private residence relief purposes apply. There will be no capital gains tax to pay. It is only necessary to look at the use of the land at the date it is sold and it is not necessary to look at the history of the land.
What tax is payable when we sell a newly built house?
Q. We have planning permission to demolish our existing house and replace it with two detached houses. We are going to build both new houses ourselves. What tax will be charged when we sell one of the new houses?
A. If you intend to sell this new house when you complete it, or soon afterwards, this is a ‘trading transaction’. You are acting as property developers, which means that when you sell the house you have built, you will be subject to income tax on the profit you make, and Class 4 National insurance contributions may be payable too. Construction industry scheme rules also need to be considered.
Can I deduct pre letting repairs from rental income?
Q. Can repairs to a property carried out 4 years before the first rent is received be allowed for deduction against rental income?
A. HMRC states that an expense incurred up to seven years before the first rent is received, is allowable. However, this assumes that you were not living in the property yourself when the repairs were done.
