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bigduckontax
bigduckontax, Accountant
Category: Tax
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Good evening I have a question relating to the Flat rate s

Resolved Question:

Good evening I have a question relating to the Flat rate scheme.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Please expand on your query.
Customer: replied 1 year ago.
Good evening I had one business a limited company which was not applicable for VAT as it trades in financials markets. However in 2011 I decide that I wanted to invest in an office investment which was let to two blue chip tenants. I lent some capital to this new company upon which interest was charged and borrowed the rest from the bank. he investment was self paying as there was nothing for me to do as the income was paying off the loan and I had no worries about the covenants. The new company gave a contract to a management firm to maintain and look after the property. This contract whilst in force did not involve the new company as costs were collected from tenants directly. Once the investment was bought my account decided that I could go the flat rate scheme. Recently the VAT made a query and they said that I should not be on the FRS as there is a close association. Both my accountant and my self feel this is not case and I was wondering I could have your input into this matter?.
Expert:  bigduckontax replied 1 year ago.
I am wondering why you should be bothered with VAT at all as property is exempt from VAT
Customer: replied 1 year ago.
This property was elected for VAT when I bought the investment
Customer: replied 1 year ago.
The investment was bought as TGOC
Expert:  bigduckontax replied 1 year ago.
Ah I see, if you are below the turnover level for VAT, 82K, why not de-register?
Customer: replied 1 year ago.
The leases were 25 years on FRI and within there the VAT was charged
Customer: replied 1 year ago.
on the rent
Customer: replied 1 year ago.
The rent roll was 114 +vat
Customer: replied 1 year ago.
sorry it should read 114000+vat
Expert:  bigduckontax replied 1 year ago.
Yes, but if you were below the turnover threshold why not de-register.
Expert:  bigduckontax replied 1 year ago.
Oh, you weren't!
Customer: replied 1 year ago.
I am note sure as the rent was +vat as stipulated in the leases
Customer: replied 1 year ago.
These leases were on going when I bought the investment
Expert:  bigduckontax replied 1 year ago.
OK so why not just operate normal VAT and recover input taxes as normal.
Customer: replied 1 year ago.
Well the accountant said this way was better as there was very little to claim and there no expenses on my part. My company was better off this way
Expert:  bigduckontax replied 1 year ago.
I would have thought six of one and half a dozen of the other, but I have been accounting for VAT since its introduction in the early 70s.
Customer: replied 1 year ago.
you are a man of great experience
Expert:  bigduckontax replied 1 year ago.
Thank you for your vote of confidence. But, we are going round in circles, what is the nub of your question.
Customer: replied 1 year ago.
The question was from the point of view are the VAT office correct in that I should not be on the flat rate scheme. Bear in mind that there may be an organisational link as I am linked to both with 100% of the shares in both firms. The loan was on interest basis and is reflected on the balance sheet. Further there was no involvement one company been dominant over the other as both were operating on their own merits. There was also no question of one surviving over the other
Customer: replied 1 year ago.
There was no sharing of property etc... There was a never a question one could not survive without the other
Expert:  bigduckontax replied 1 year ago.
Loans and the interest thereon are outside the scope of UK VAT. You are entitled to be on the VAT flat rate scheme if your turnover is under 150K, which your appears to be.
Customer: replied 1 year ago.
Yes that is correct. its under 150k but on the criteria do you see any issues where could fight this as I am looking to fight them if need be
Customer: replied 1 year ago.
I appreciate this is a tough question
Expert:  bigduckontax replied 1 year ago.
Why not just go on to the normal VAT scheme and elect to leave the flat rate?
Customer: replied 1 year ago.
VAT argue that there is an organisational link which I concede there is but the financial link is a normal business relationship and not an association
Customer: replied 1 year ago.
The answer to that is because there is big amount the VAT are trying to reclaim back as underpayment going back to the point from where I bought the property
Customer: replied 1 year ago.
As that was when the Flat rate scheme started
Customer: replied 1 year ago.
Sir do you understand the question have raised here this evening? The question is should my investment property firm be on the flat rate scheme or not on the basis of what I have mentioned. Is there an association or not ?
Expert:  bigduckontax replied 1 year ago.
There is no mention of such a link in the Gov UK advice on the Flat Rate scheme. I suspect that some official in your VAT office has got it round his neck; a not unusual occurrence in my experience. I see no reason why you should not continue on the scheme if it is cost effective for the company.
Customer: replied 1 year ago.
Thank you so that affirms your view my accountants and mine. Greatly appreciated
Customer: replied 1 year ago.
Have a nice evening
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance. Please be so kind as to rate me before you leave the Just Answer site.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.