September questions and answers

Newsletter issue - September 2019.

Q. I am a qualified chiropractor and I have been running my own business for many years. I would now like to specialise in a particular area and have enrolled on a university course to obtain the relevant qualification. The cost is around £18,000 per annum and the course is three years in duration, during which time I intend to continue working part-time. Is the cost of the course deductible for tax purposes?

A. Expenditure incurred by the owner of a business on training courses for themselves is revenue expenditure if the course merely updates existing expertise or knowledge. Expenditure on a course which provides new expertise or knowledge is capital. HMRC accept that 'the line between the two may often be difficult to draw' and they may require further information from you to make a decision. HMRC's Business Income Manual provides further guidance at paragraph BIM35660.

Q. What is the statutory time limit for keeping VAT records?

A. Generally, you must keep all your business records for VAT purposes for at least six years (or ten years if the trader uses the HMRC VAT mini-one-stop-shop (VAT MOSS)). Records that you use for other tax purposes may need to be kept for longer periods. VAT records may be kept on paper, electronically or as part of a software program (eg book-keeping software) - but whichever method is used, the records must be accurate, complete and readable. HMRC can visit businesses to inspect record-keeping and impose penalties if the records are not in order. If the six-year rule causes serious storage problems or undue expense, or you need advice on records for other types of tax, then you should consult HMRC's VAT general enquiries helpline. HMRC may be able to allow you to keep some records for a shorter period.

Q. I own a buy-to-let property, which has a mortgage of £50,000 owing on it. I bought the property for £100,000 and it is currently worth around £150,000. What will be the capital gains tax implications if I pay off the mortgage and then sell the property?

A. The gross capital gain will be the difference between the sale price the purchase price, ie £50,000 (£150,000 - £100,000). A mortgage is not relevant to a capital gains computation unless, in rare circumstances, where a purchaser takes over responsibility for a mortgage (see HMRC's Capital Gains Tax manual at paragraph cg12706 for further information).