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August questions and answers

Q. I am a sole trader trading as a graphic designer. I am voluntarily registered for VAT and I have several commercial clients who are also registered for VAT. Due to the coronavirus outbreak my graphic design business is very quiet, so to supplement my income I want to buy and sell bicycles to private individuals. Can I run the bicycle business as a different non VAT-registered business whilst keeping the graphic design business registered for VAT?

A. HMRC’s VAT Registration manual at 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 graphic design business for VAT purposes. You can always re-register as and when this side of your business picks up again.

Q. My father died in 2019 and my brother and I inherited a small commercial business unit. Probate is nearly complete now. 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.

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 program (e.g. book-keeping software) – but 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.

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