Purchase invoice and partial exemption calculations
I have an unusual situation with a partially exempt client, namely that purchase invoices are not processed into the accounting system until they have been approved by budget holders. This means, for example, that some invoices dated March 2026 will be accrued as a cost in March accounts, but input tax will not be claimed until approval of the invoice the following month, ie April 2026. The business submits calendar quarter VAT returns and does not use the cash accounting scheme.
It seems to me that the correct month for partial exemption calculations is the month of approval, but a colleague disagrees and said that if a tax invoice has been issued by and received from a supplier, that is the date when partial exemption calculations are relevant, ie March rather than April in the above example. As most of my client’s input tax is residual input tax, and the standard method gives fluctuating percentages each period, the timing issue is important. What do readers think?
Query 20,699 – Partial Polly.
Does robbing Peter to pay Paul have unintended consequence?
My client had a self-assessment liability for 2024-25 of £8,000, so his payment on account (POA) was set by ‘the system’ at £4,000. He told me that his dividend income from his personal company had gone down substantially following his retirement, so I made a claim to reduce the POA due on 31 January to £500, and that is what he paid. He has now told me that he is short of cash and intends to take a large dividend out of the company’s reserves. His liability for 2025-26 might even be higher than £8,000, so he ought to pay the sum the system asked for. There is no option to ‘reverse a claim to reduce POA’ on the HMRC system – only ‘make a claim to reduce’.
My question is, is it actually necessary to amend the claim to reduce, or can he just pay another £3,500 and wait to sort it out when he submits the tax return? Does it make any difference, or is there any other possible consequence of having made an honest claim that turned out to be unjustified based on later events?
Query 20,700 – Strapped.
Tax considerations when transferring valuable metals
My client operates a consultancy business through her own service company. I do not consider that IR35 is an issue as she has various clients and is not subject to supervision, etc.
Given recently increasing prices in precious metals, she was thinking that the company might buy gold and/or silver. I believe that while the former is VAT free, VAT is chargeable on the latter.
The company is not registered for VAT at present, although as her clients are large businesses, registration would not be an issue for her customers. If the company registered for VAT, could the VAT charged on silver be recovered?
The company might hold these metals as an investment. Is corporation tax payable on any gain? I believe that some gold is not taxable on individuals.
The other thought was that if the company bought gold and silver, could these then be passed to the director as part of her remuneration? I appreciate that income tax and National Insurance would have to be charged, presumably on the market value at that point, but what about VAT on silver?
Am I right in thinking that if this was transferred as salary, VAT would not be chargeable? Is this a means of the director acquiring silver without a VAT charge or am I overlooking something here?
Views are welcomed from Taxation readers.
Query 20,701 – Gollum.
Goodwill good?
I saw a recent question about goodwill on incorporation and it made me wonder – is it still a good idea to put a high value on this, creating a chargeable gain at the time? I recall that the idea used to be that you would pay CGT at a low rate, with the benefit of entrepreneurs’ relief, and this would create a credit in the company that the shareholder could draw on without further tax consequences. However, the company will never get a tax deduction for the goodwill, so there is a down payment of CGT for the benefit only of not paying income tax on dividends later.
I find it hard to get my head around the maths – can anyone provide a clear and universal explanation of the pros and cons?
Query 20,702 – Confused.
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