Should we adjust VAT import error on next return?
One of my clients purchased a helicopter in June 2023 for £600,000 plus £120,000 VAT; it was imported from Canada and was wholly relevant to his business because the intention was to hire out the aircraft to wealthy individuals and corporate customers, and that has happened since then. There is no private or non-business use.
VAT was not paid at the time of importation because my client elected for postponed VAT accounting but he did not include a reverse charge declaration on his VAT return for the period of purchase. This is my first query: should he record an additional £120,000 in box 1 of his next VAT return as an error correction and £120,000 in box 4 as another error correction, or is this not necessary because the ‘net tax’ over or underpaid is zero? What about the box 7 omission in June 2023, which should have recorded an extra £600,000?
Second, a potential hire customer has asked for evidence of VAT being paid on the import of the vehicle which, I guess, would be a copy of the import statement issued by HMRC for postponed VAT in June 2023. But, as I understand it, a business can only get retrospective copies of statements for the past six months – if so, what evidence could my client produce to the potential hirer to keep him happy?
Query 20,739 – Pilot Pete.
Loss flexibility?
My client has realised a loss on some enterprise investment scheme shares in 2025-26 – £300,000, net of the income tax relief obtained. He had deferred capital gains against the subscriptions, so there is also a chargeable gain of £120,000. He had other income of £160,000 in 2025-26, and income of £200,000 in 2024-25.
I think that the best possible outcome is to claim share loss relief of £160,000 in 2025-26 against income, then the balance of £140,000 in 2024-25 against income, leaving £120,000 as a taxable capital gain in 2025-26 (chargeable at 24% once reliefs have been taken off).
Is that combination of claims possible, or are there restrictions on the order in which the loss must be offset? I cannot see anything that requires the loss to be set first against the deferred gains, even though they arise on the same disposal. Am I missing anything?
Query 20,740 – Hopeful.
Capital gains tax rate consternation
My client has a large amount of retained profit in his personal company, which he has been hoping to extract as a capital gain on formal liquidation in due course. He is alarmed by talk of realigning the capital gains tax (CGT) rate with income tax rates, which would massively increase the tax charge on this cash (which has already borne corporation tax at 25%). He is considering an immediate liquidation to forestall any possible change, but the company is entitled to bonus payments in relation to past services rendered to clients if certain conditions are satisfied in the future.
Do readers think that it is possible for the company to assign the benefit of its contract to a different company, or to him personally, and then to enter liquidation to extract the existing reserves at current CGT rates? The client has already exceeded the lifetime maximum for business assets disposal relief, so there is no issue there. I am concerned that there may be tax or practical catches in this idea, but the difference between a possible 45% marginal rate and a 24% rate on several million makes it worth considering.
Query 20,741 – Worried.
Petrol station upgrade
My client’s company is an independent owner-operator of a petrol service station that has recently upgraded its service facilities. This has involved extending the existing canopy over the forecourt and adding new pumps. A new, bigger, underground petrol tank has been installed, involving considerable amounts of additional pipework. New lighting and an enhanced security system have also been added.
My first query concerns the extended canopy. Will this qualify as an item of plant of machinery on the basis that it performs the function of allowing customer to keep dry when filling up with petrol during periods of rain? Second, could the new lighting be considered a repair, on the basis that lighting technology has improved markedly since the original lights were installed, so that any new lights are going to be better than the old ones? Finally, do readers see any difficulty in the company obtaining capital allowances on the new pumps and underground tanks?
Query 20,742 – Motorist.
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