Q: I own a property in Spain and I have been told that I have to declare the income from this property on my UK tax return, is this correct?
A: If you live and pay tax in the UK then you must declare rental income from overseas rental properties on the foreign pages of your tax return. The profit from the overseas lettings can be worked out in exactly the same way as for a UK property, however if you make a loss from the rental then this cannot be offset against profits from UK rental properties.
Another thing to consider is that if you live and pay tax in the UK then if you sell the property and make a gain then this will be subject to UK Capital Gains Tax.
If you do make profits or a capital gain then you may find that there is a foreign tax charge. If this is the case then you will usually get some relief on your UK tax return for this, so that you do not end up paying tax twice.
The above assumes that the taxpayer lives and pays tax in the UK, however if you are not originally from the UK, or spend less than half of the year here then the tax situation can change. The residency status of an individual is a complex area of legislation and if you have any queries concerning your liability to tax on overseas rental properties please consult TaxAssist Accountants.
Q: My VAT registered business is selling goods by mail order and I have just dispatched some goods to an individual in France who is not VAT registered. Should I be charging VAT on these goods?
A: When you sell to non VAT registered individuals in EU countries this is known as distance selling and the sale is treated as if it has taken place in the UK. Therefore you must charge VAT at the applicable UK VAT rate and enter the details in Box 1 and Box 6 of your return as normal.
If however the level of your sales to any one EU country exceeds a certain limit then you must register for VAT in that country. This limit is known as the distance selling threshold. Each EU country sets its own threshold which can be €35,000 or €100,000 per year (or the country’s currency equivalent if not using Euro’s). Once a UK business registers for VAT in an EU country then all the sales made to individuals there will be subject to the VAT rate applicable in that country instead of the UK.
How to Register a Partnership?
Q: My business partner and I have decided to carry on trade as a partnership. What are the formalities in registering ourselves and the partnership with the tax authorities?
A: When you become self employed you should register with HMRC. There are three ways you can register these are either online, telephone or post.
Details on how to register online or telephone are on the HMRC website, www.hmrc.gov.uk
If registering by post, HMRC have issued new forms from 25 October 2010 to use for partners and partnerships.
Form SA400 should be completed on behalf of the partnership by the nominated partner and will enable HMRC to issue the partnership with a unique taxpayer reference (UTR) number. This number should be quoted on the partnership self assessment tax return.
Form SA401 should be completed by each partner and will enable HMRC to issue them with a UTR, if they do not already have one. This form will also register the partners for class 2 national insurance contributions.
Lloyd Stubbs specialises in managing tax and accountancy affairs for small business owners and can be contacted by phone or email
Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.