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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5023
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have two potential businesses i would like to start in the

Customer Question

I have two potential businesses i would like to start in the near future.
1) Car rental business:
i will purchase second hand vehicles and rent them out as taxi's in exchange for a fee which is paid on a weekly basis. I will service the vehicles and handle any repairs.
Will i be able to write off vehicle deprecation for my fleet?
Will i be able to write off car repairs/tires, mot, etc?
2)Event promoting:
I will be selling tickets for various shows across the uk, and will price based on market value and will have a very slim margin. With that said for the business to be viable i must sell large quantities and will most likely exceed the vat threshold. Is there any way to avoid this and only pay marginal tax?
At a 10% commission vat will leave me at a major loss and the business will fail.
Thanks
Submitted: 10 months ago.
Category: Tax
Expert:  taxadvisor.uk replied 10 months ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Expert:  taxadvisor.uk replied 10 months ago.

Thank you fo ryour question.

Please advise if the event promoting tickets have VAT included when you buy them for resale.

Many thanks

Customer: replied 10 months ago.
they have vat included when purchased. My commission is then 10% upon resale, the vendor i sell through charges customers vat and service fees on top and pays me what i paid plus 10% commission.
Expert:  taxadvisor.uk replied 10 months ago.

Thank you for your reply.

You had two questions ---

1) Car rental business:
i will purchase second hand vehicles and rent them out as taxi's in exchange for a fee which is paid on a weekly basis. I will service the vehicles and handle any repairs.
Will i be able to write off vehicle deprecation for my fleet?
Will i be able to write off car repairs/tires, mot, etc?

The answer to both is YES as it is a business assets and repairs are business expense.

2)Event promoting:
I will be selling tickets for various shows across the uk, and will price based on market value and will have a very slim margin. With that said for the business to be viable i must sell large quantities and will most likely exceed the vat threshold. Is there any way to avoid this and only pay marginal tax?
At a 10% commission vat will leave me at a major loss and the business will fail

Answer - you would reclaim VAT on tickets purchased and sold through this vendor and effectively pay HMRC VAT on the commission. You should not be out of pocket if you are VAT registered as output would equal input on ticket price. Your net income is the commission received from sales.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 10 months ago.
but i was told was that asset depreciation was not tax deductible. For some of the vehicles i intend to purchase depreciation could be as much as 20-30% since they are very niche. I would need to offset the depreciation somehow and was seeking guidance to how i would be able to do that.Oh i see, would i be able to offset business expenses related to this venture?
Also, given that the business model is high volume how would i manage my records?
Its physically impossible to write down every single transaction as the volumes will be very high to sustain the business.
Would it be possible to calculate reclaimed vat on the entire inventory total and then calculate owed hmrc vat for the gross revenue?And as far as structuring, would it be wiser to set up two ltd companies or manage both from one?
Each business would be financially independent from one another.
Expert:  taxadvisor.uk replied 10 months ago.

Thank you for your reply.

Assets depreciation is an accounting concept and for tax accounts it is added back for tax calculation and in its place you get capital allowance.

The end result is the same ..you will be able to claim capital allowance on the vehicles you purchase for rental business.

You would be able to calculate VAT on volume sold in the VAT quarter as your margin is the 10% commission on sales.

I hope this is helpful and answers your question.

Expert:  taxadvisor.uk replied 10 months ago.

If the businesses are not complementary, then you would be best advised to keep them separate.

Customer: replied 10 months ago.
how does capital allowance work?Lets say i purchase a vehicle for £20,000.
At the end of the year it is now worth £14,000.
It grossed £10,000 that year.
Is 4k taxed?
or the entire 10,000?
Expert:  taxadvisor.uk replied 10 months ago.

This is how capital allowance works..

lets say you claim capital allowance at 20% on the cost

profit from trade £10,000

less capital allowance as in example £4,000

Taxable profit for corporation tax purposes (10,000-4,000) £6,000

When you sell or trade in the vehicle and you get £14,000 for it, you would claim balancing allowance of £2,000 (the difference betweein written down value and sale proceeds).

I hope this is helpful.

If there are no more issues, I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.

Expert:  taxadvisor.uk replied 10 months ago.

Hi there

Just checking to see if you need further clarification on capital allowances vs. accounting depreciation or have I answered your question.

Many thanks

Customer: replied 10 months ago.
wait i would like to just clarify if i may.lets say 100,000 including vat.( vat is 16,666)sale is 150,000 including vat (vat is 25k)125k is taxed at 20% leaving 100k.So vat and tax took all the profits?
Surely thats not correct.
Expert:  taxadvisor.uk replied 10 months ago.

Please advise what these figures are

what is £100k - is this the buying price?

If so, VAT payable is (25,000-16,666) £8,334

Tax is payable on (125,000-83,334) 41,666 x 20% = £8,334

Profit after tax is (41,666-8,334) = £33,332

I hope this is helpful

Customer: replied 10 months ago.
Tax is payable on (125,000-83,334) 41,666 x 20% = £8,334how was the 83,334 calculated?
Expert:  taxadvisor.uk replied 10 months ago.

Profit is (sales ex VAT) minus (Purchases ex VAT).

I take it the first figure you gave was purchases £100,000 including VAT 16,666.

When you prepare accounts you would take figures ex VAT.

I hope this is helpful

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 10 months ago.

I thank you for accepting my answer.

Best wishes

Customer: replied 10 months ago.
is it possible to ask a followup?
Customer: replied 10 months ago.
would it be possible to be registered as both sole trader and be a director of a ltd company?
how often do ltd companies need to file?
is corporation tax annual or quarterly?
Expert:  taxadvisor.uk replied 10 months ago.

This is an unrelated question. As per Just Answer terms, you should ask as anew question.

I will be happy to help you and you can ask for me in the body of your question.

Many thanks.