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July Questions and Answers

Newsletter issue - July 2021

Q. I own several restaurants which all sell English-style food. I am planning to sell two of these to separate buyers. The first intends to operate an Asian fusion restaurant, and the second (smaller) premises is going to be turned into a micropub. Both buyers are insisting that the sales will meet the conditions for a transfer of a going concern (TOGC) so that I shouldn't add VAT to the purchase costs. However, I'm slightly worried that this is not correct, as in the first case the type of food served will be different, and in the second case the new establishment will not be a restaurant, although I am told the owner will serve bar snacks. What is the correct position?

A: The good news in the first instance is that the fact that the first buyer will be serving a completely different type of food is irrelevant, it is the fact that they intend to operate as a restaurant, i.e. the same type of business, that is key. Subject to all the conditions being met, this should not be a problem and you shouldn't need to charge VAT. However, the second buyer is intending to trade as a completely different type of business and so this cannot come within the TOGC provisions. You will need to add VAT to the price charged accordingly.

Q. Following the end of the first national lockdown last year I moved to the UK to take up employment. I am intending to claim the remittance basis for as long as possible whilst I am here. However, I also intend to make investments in UK shares. If I make substantial gains on these, am I able to offset offshore losses?

A: By default, offshore capital losses cannot be used to offset UK gains where the remittance basis is used. However, it is possible to make an election to permit them to be offset. You must make the election for the first year you claim the remittance basis, and the time limit for doing so is within four years of the end of that tax year. You should be aware that making the election may not be advantageous, as one result of making it is a strict ordering of how all losses, including UK losses, are offset. This can lead to significant inefficiency. As the election is irrevocable once made, you should speak to a specialist adviser before deciding whether or not to make it.

Q. Our company has a year end of 31 July each year. We have managed to increase our profits despite COVID19 and are likely to vote a bonus to the directors for the first time in several years. The problem is we are unlikely to have the cash to make payment until November for various logistical reasons. Can we include the bonus as a deduction in the accounts to 31/7/2021?

A: Yes - if you act promptly. To be able to deduct the bonus from this year's taxable profits, you need to create an obligation to pay it before the year end. You should hold a board meeting to do this. Once the obligation is created, the amounts must be paid within nine months of the year end, so payment in November will not be a problem.

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