VAT is supposed to be simple. We all know, it often isn’t! A recent case raised an interesting question: can you reclaim VAT on the costs of running a free seminar? HMRC argued that the VAT couldn’t be reclaimed because the seminar was free. Their logic was that since there was no payment from attendees, there was no VAT-able supply of goods or services. No VAT-able supply, they said, means no input tax to reclaim. But things aren’t quite that straightforward! HMRC guidance often suggests that input tax must relate to the specific business you normally carry on. However, the legislation actually says VAT can be treated as input tax if it relates to purchases intended for use in any business activity you carry on, or plan to carry on. Of course, there are some common situations where VAT can’t be recovered. These include purchases linked to exempt supplies like most business entertainment, certain second-hand goods schemes, cars available for private use, or items bought for non-business purposes.  This is where the “direct link” test comes in. Courts have confirmed that for VAT to be recoverable, there must be a clear, direct, and immediate link between the cost and a VAT-able business activity. At first glance, a free seminar might not seem to meet that test. But if the real purpose of the seminar was marketing and promoting the business, then the link is still there. It’s effectively an advertising expense! So, even if a purchase isn’t directly tied to a VAT-able sale, you may still recover the VAT if there’s a clear connection to your business activities! Still a bit confused or want some help with a specific situation you are in? Give Rustrick Accountants a call on 01622 738165 and we can answer and advise you today!

Heads up if you’re a sole trader or property business owner with a combined gross income over £50,000 in 2024/25; HMRC is rolling out letters about Making Tax Digital for Income Tax (MTD IT), and you could be affected from April 2026.  The letters are being sent in batches. If you submitted your 2024/25 tax return between 1 September and 30 November 2025, your letter should already be on its way. Returns submitted after 1 December 2025 will receive letters in March 2026, meaning if you submitted late, you might get notice just as the MTD IT deadline is approaching. If you’re one of the 1 million taxpayers who hasn’t yet submitted your 2024/25 tax return, you may not get a prompt from HMRC at all. And if your accountant files your returns, they won’t necessarily get a separate letter either. Don’t wait for the letter. If you meet the income threshold, sign up for MTD IT now to avoid last-minute stress and ensure you’re compliant by April 2026! Need help? Call 01622 738165 and the friendly Rustrick Accountants team will help you out

Investing in a company that fails is never fun, especially when your shares are now basically worth nothing and nobody’s willing to buy them! But the good news is you don’t have to sell your shares to get some tax relief on your bad investment! If your shares have become negligible in value, HMRC allows you to make a “negligible value claim”. This means you can treat the shares as if you sold them and immediately re-acquired them, crystallising a capital loss even though you still own the shares. You can make this claim on your self-assessment tax return or by writing directly to HMRC. There’s even a published list of eligible quoted shares to check if yours qualify! Timing your claim can make a real difference. You can choose the tax year in which the capital loss is recognised. For instance, if your shares became worthless a few years ago, you could claim the loss now or wait until the next tax year. Watch out though, if the company is dissolved, the shares no longer exist, so a negligible value claim isn’t possible. You can also backdate your claim. If your shares were worthless in earlier tax years, you can treat it as a loss up to two years prior to the tax year in which you make the claim. This can be particularly valuable if you had capital gains in those earlier years. If the shares were unquoted (purchased directly from the company) and the company qualified as a trading company, the rules get even better. In this case, the loss can be offset against income instead of just capital gains. Since income tax rates are generally higher than capital gains rates, this could mean an even bigger refund. Once claimed, the loss can be applied to the current tax year or the previous one.  Have you got a dead investment that you want to turn into a refund today? Give Rustrick Accountants a call on 01622 738165 and we can help you out!

If you’re a company director, you’ve probably noticed the new Companies House identity verification (IDV) rules. These rules were rolled out on 18 November 2025, making it mandatory for directors and people with significant control (PSCs) to verify their identity. Directors and PSCs must complete IDV to be properly registered. After a voluntary period, Companies House reported that over 1 million individuals had already verified, leaving around 7 million yet to comply. Some users have faced technical issues and delays receiving their personal codes, so leaving it to the last minute is risky. Directors : If already registered on 18 November, IDV must be completed before your first confirmation statement after 18 November. Your confirmation statement must include your personal code. PSCs who are also directors : Must confirm IDV within 14 days of the company’s confirmation statement deadline. PSCs who are not directors : Must complete IDV within 14 days of the start of the month of their birthday. If you miss the deadline there will be serious consequences: Confirmation statements won’t be accepted without the director’s personal code, and failing to file one is an offence. Individuals acting as directors after the deadline commit an offence. Companies allowing this also commit an offence. Failing to complete IDV itself is an offence. Companies House typically contacts individuals and companies first to alert them to breaches, giving an opportunity to rectify the situation. Ignoring this can lead to fines, prosecution, or disqualification.  Failure to comply can have serious legal consequences. So, check your deadlines, don’t leave verification to the last minute, and get verified in plenty of time. Need help? We are only a phone call away! Call 01622 738165 and Rustrick Accountants will sort this out for you right awa

Getting a £200 VAT penalty can be frustrating, especially if you’re not sure how it happened. From January 2023, HMRC introduced a new points-based penalty system for late VAT returns. So now, instead of immediately issuing fines, HMRC gives businesses penalty points when returns are submitted late. But once you collect enough points, you will start to get the £200 penalties. Every time a VAT return is filed late, your business receives one penalty point. There’s no grace period either- even if your return is just one day late, you’ll still get the point! This applies to all returns, including those showing no VAT to pay or even a repayment. The £200 fine only kicks in once you reach a specific threshold. For businesses submitting quarterly returns, the penalty arrives when you reach four points. For monthly returns, it’s five points, and for those using the annual accounting scheme, the penalty is issued once you reach two points. If you believe there was a genuine reason for filing late, you can appeal the point or penalty. However, HMRC is quite strict about what counts as a reasonable excuse. You can’t just say that your bookkeeper forgot or was too busy! The good news is that penalty points don’t stay on your record forever. If you haven’t reached the penalty threshold, points automatically expire after two years. This happens without you needing to contact HMRC. You can check how many points you currently have by logging into your HMRC online account. The two-year countdown doesn’t start from the VAT period itself, but from the end of the month of the filing deadline. So if a return with a filing deadline of 7 February was submitted late, the point would expire two years after the end of that month, not the VAT period it relates to.  If your business reaches the points threshold and receives the £200 penalty, things become stricter. After that, every additional late return will trigger another £200 fine. The only way to clear your points is to achieve what HMRC calls a “period of compliance.” This means submitting all future returns on time for a certain period. You must also make sure all VAT returns from the previous two years have been submitted. If any returns are still outstanding, your penalty points won’t reset even if you meet the compliance period. The new system is designed to encourage businesses to stay on top of their VAT deadlines, but repeated delays will quickly lead to fines! Give Rustrick Accountants a call on 01622 738165 and we can help you stay on top of these deadlines or appeal any penalties you may have received!

There’s finally some good news for business owners and farmers following Budget 2025. The new £1 million cap on 100% business property relief (BPR) and agricultural property relief (APR) for inheritance tax (IHT) is now transferable between spouses and civil partners.  From 6 April 2026, the 100% IHT relief for business and agricultural property is capped at £1 million per person. Originally, if you didn’t use your £1 million allowance on the first death, for example, because everything passed to your spouse, it would have been lost. That could have meant a significantly higher IHT bill on the second death. In some cases, families were looking at up to £200,000 more in tax simply because the allowance wasn’t transferable. Now, any unused £1 million allowance can be transferred to a surviving spouse or civil partner. That brings it in line with the normal IHT nil rate band rules, which already allow allowances to pass between spouses. In practical terms, this means a married couple could potentially benefit from a combined £2 million cap on 100% relief. So, now you can leave everything to your spouse without losing the allowance. This means that there is no longer a need to split up your business just to protect the full £2 million of IHT relief. The transferability change makes estate planning far more straightforward and removes a major concern for family businesses! Give Rustrick Accountants a call on 01622 738165 today if you want to discuss things further or want to see what would be best for you and your business

HMRC is currently targeting companies that may have incorrectly claimed corporation tax marginal relief (MR). If your company falls into this category, you might receive a letter questioning your claim. So what’s going on and what should you do? When corporation tax increased in April 2023, marginal relief was introduced to ease the jump. Companies with profits up to £50,000 pay 19%. Once profits go over that, the 25% main rate kicks in. Marginal relief softens that jump for companies with profits between £50,000 and £250,000, tapering the tax increase so it’s not such a shock. But, if your company is associated with other companies, they must share the marginal relief limits. You don’t get separate £50,000 and £250,000 thresholds for each one! Companies are seen as “associated” if; they’re in the same group, they’re controlled by the same people or if they’re commercially linked.These rules are tricky, and HMRC believes many businesses have misunderstood them, leading to overclaimed relief. If HMRC thinks you may have overclaimed, it will send a letter. Some versions are quite firm and hint at compliance checks. What you must do is; Review your corporation tax return for the period including 1 April 2023 onwards Check whether the companies HMRC lists as “associated” really are associated Don’t assume HMRC is automatically right. In some cases, its list has included passive companies that shouldn’t count towards the marginal relief calculation. Technically, you’re not legally required to reply within 30 days. Practically? You should. Ignoring it increases the risk of a formal enquiry later. If you need more time, ask for an extension. And if you still believe your marginal relief calculation is correct, ask HMRC to explain its reasoning. If you receive a marginal relief letter, don’t panic! Just give us a call on 01622 738165 and we can figure out if your marginal relief calculation is correct and how to move forward with HMRC

You’ve got a big unpaid invoice. It’s getting further past its due date and you’re starting to accept it may never be paid. But you’ve already handed the VAT over to HMRC. So, how do you get that money back? There are two main ways to recover the VAT.  The first is bad debt relief. To claim this, the invoice must be more than six months overdue (if there’s no payment date, the clock starts from the invoice date). You also need to formally write the debt off in your accounts and confirm it hasn’t been sold or transferred. Once those conditions are met, you reclaim the VAT on your next return. But you have to wait at least six months. The second option is often quicker: issue a credit note. If you agree to reduce the amount owed (for example, by offering a discount to encourage settlement) you can reduce the VAT. The credit note must be issued within 14 days of agreeing the reduction, and you adjust the VAT in the same quarter you issue it. That can mean recovering the VAT sooner, or even avoiding paying it in the first place if timed correctly. Bad debt relief claims are time-limited (four years and six months), but issuing a credit note isn’t subject to the same deadline. If you’ve missed the bad debt window, a credit note may still solve the problem. So, issuing a credit note is often the faster way to get your cash back. Give Rustrick Accountants a call on 01622 738165 and we can help you get the ball rolling.

If you own residential rental property personally, you’ll already know the frustrating bit: residential rent is VAT exempt. That means you can’t reclaim VAT on repairs, maintenance or other costs. But if you also run a VAT-registered company, there might be a way to improve the position. If you run multiple activities under one VAT registration, partial exemption rules apply. If the VAT linked to your exempt activity (like residential letting) is: No more than £625 per month on average, and No more than 50% of your total input VAT then you may be able to reclaim all your VAT; including the VAT relating to the rental property. But, for VAT purposes, you and your company are separate legal entities. So if you personally own the property, your company can’t simply reclaim the VAT on its costs. The activities have to belong to the same taxable person. So what should you do? Rather than transferring the property into the company (which can trigger other tax issues), you could grant your company a lease over the property. The company then becomes the landlord, manages the property, and the rental activity falls within the company’s VAT registration. But if your property costs are likely to regularly exceed the 50% rule, this approach may not work. You could structure the lease with a lump sum payment and a low annual rent. Part of that may be treated as capital and, if it falls within your annual CGT exemption, could be largely tax-free. With careful structuring and planning, you can turn a VAT cost into a VAT saving! Give Rustrick Accountants a call on 01622 738165 and we can help you save money today.