This month we answer questions about: Running a VAT registered and a non-VAT registered business at the same time, capital gains on the sale of a property and the length of time you are required to keep VAT records.
Q. I am a sole trader trading as a website designer. I am voluntarily registered for VAT and I have several commercial clients who are also registered for VAT. Due to the COVID-19 outbreak my website design business is very quiet, so to increase my income I want to buy and sell restored furniture to private individuals. Can I run the furniture restoration business as a different non-VAT registered business whilst keeping the website design business registered for VAT?
A. HMRC's VAT Registration manual VATREG02200 states that 'In all cases it is the person (natural or legal) rather than the business which is registered, so a trader must take into account all their business activities'. Therefore, in your situation it may be beneficial to deregister the website design business for VAT purposes. You can always re-register as and when this business picks up again.
Q. My mother died in 2019 and my sister and I inherited a small commercial business unit. Probate is nearly complete. If we sell the property in the future, will capital gains tax be payable on the disposal proceeds?
A. The acquisition value for future capital gains tax computation purposes will be the market value at the date of death. This is known as the 'probate value'. Capital gains tax will be calculated under the normal rules on any increase in value from that date until the date of disposal. Further information can be found here.
Q. How long do I need to keep VAT records for?
A. VAT-registered businesses must:
- keep records of sales and purchases;
- keep a separate summary of VAT; and
- issue correct VAT invoices
In the UK, VAT records must be kept for at least six years (or ten years if the trader uses the HMRC VAT mini-one-stop-shop (VAT MOSS) service). VAT records may be kept on paper, electronically or as part of a software programme (e.g. bookkeeping software). Whichever method is used, the records must be accurate, complete, and readable. HMRC can visit businesses to inspect record-keeping and impose penalties if the records are not in order.
