I’m gonna sit right down and write myself a letter
I have recently taken on a new client who has previously dealt with his own tax affairs. As an accountant he has quite a good understanding of financial affairs, including tax. He owned shares in an unquoted trading company that dissolved at the end of June 2025. The client submitted a negligible value claim to HMRC dated 10 August 2025 claiming that the shares were of negligible value at 31 March 2025. HMRC has written back to the client stating that the claim is invalid as he did not own the shares at 10 August 2025, ie the date of his letter to HMRC. I would be grateful if readers could advise whether HMRC is correct or, as I believe, that the date is that stated in the claim, ie 31 March 2025 when he still held the shares, and not the date of his letter.
Query 20,631 – Invalid.
Trade or no trade?
My client’s father was a composer. When he died, the right to royalties passed to his four children. My client has decided to equip herself to try to increase the revenue from this source: she has enrolled on a course and subscribed to relevant websites and associations, and hopes to find ways to exploit the asset. I am not sure how to treat this in her tax return, given that she is entitled to a quarter of the revenue, currently based solely on what her father did. Is this pre-trading expenditure that will be allowed if she later succeeds in generating more revenue, or is the expenditure deductible from the present amount as an adventure in the nature of trade? Or is it not deductible at all? And is it relevant that her siblings will benefit from any success she has?
Query 20,632 – Headscratcher.
Did change of legal entity create option to tax problem?
One of my clients buys and sells football equipment and might have scored a VAT ‘own goal’. He traded as a sole trader for many years and was registered for VAT, and then his wife became a partner on 1 January 2023. On the same date, the freehold property which he owns – and from where trading takes place – was transferred from his name into joint names with his wife, ie they own 50% each.
The problem is with the option to tax; my client completed form VAT 1, VAT 2 and VAT 68 to reflect the change to a partnership on 1 January 2023, ie to keep the same VAT number. My client had previously opted to tax the building because the first floor is rented out to a commercial tenant, ie VAT is charged on the rent to avoid a partial exemption problem. The partnership has continued to charge VAT on the rent to the tenant and claim input tax on related expenses.
However, should the partnership have made a separate option to tax election on 1 January 2023? If so, is it possible to backdate it now? A colleague I play tennis with has suggested that his wife should complete form VAT1614A and backdate it to 1 January 2023, and send the form by email to HMRC, and then the problem has been resolved, ie they will both have a valid option to tax election in place on this building. Is this the correct route we should follow or, to quote a tennis phrase, would this create a double fault?
Query 20,633 – Ferguson.
Personal or business?
Like many people, I have frequently received compensation payments using the train companies’ ‘delay repay’ systems. Sometimes I find I have travelled (slowly) for nothing. For me, this has always been in respect of personal travel. Now one of my clients, who runs a personal company, has received a refund in relation to a journey paid for by the company. My first reaction is to treat it as a reduction in the company’s expense; however, could it be compensation for the personal inconvenience suffered by the traveller as an individual? If so, presumably it would not be taxable. Would it make any difference if the trade was unincorporated?
Readers’ views would be welcome.
Query 20,634 – Late Arrival.
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