Q. What should I do about an error I accidentally made on my latest VAT return?
A. You can adjust your current VAT account to correct errors on past returns if the error was below the reporting threshold (in broad terms this is less than £10,000, or up to 1% of your box 6 figure (up to a maximum of £50,000); was not deliberate; and relates to an accounting period that ended less than 4 years ago.
When you submit your next return, add the net value to box 1 for tax due to HMRC, or to box 4 for tax due to you. Make sure you keep good accurate records relating to the adjustment. Any errors that do not meet these conditions must be notified to HMRC directly.
Q. My husband and I own a rental property in joint names. We would like to transfer ownership of the property to our twelve year old son. Can minors own property in the UK?
A. In this country, a minor (someone under the age of 18 in England) cannot legally own a property. This means that an adult must be the legal owner, and own it on bare trust for the minor, who will be the beneficial owner. You can therefore transfer to your son, but he will not become the legal owner until he is 18.
Another issue to be aware of is that when a parent transfers an asset to a minor child, and the asset produces income of more than £100 per year, the parent is liable to income tax on that income until the minor reaches the age of 18.
Q. My estate, which includes my home, is currently worth around £600,000. I am single, have never been married and have no children. I intend leaving my estate to my siblings. Will they qualify as ‘direct descendants’ and, in turn, will my estate qualify for the extra £175,000 family home inheritance tax (IHT) allowance?
A. The existing IHT nil-rate band is set to remain at £325,000 until the end of 2020/21.
An additional nil-rate IHT band may be available when a residence is passed on death to a direct descendant. The set additional amounts are as follows:
£100,000 in 2017/18
£125,000 in 2018/19
£150,000 in 2019/20
£175,000 in 2020/21
There is a tapered withdrawal (of £1 for every £2) of the additional nil-rate band for estates with a net value of more than £2 million.
Unfortunately the additional relief will only be available where the family home is passed by lineal descent. This will include a spouse or civil partner of a lineal descendant, including the widow, widower or surviving civil partner of a lineal descendant who has died, provided that the surviving spouse or civil partner has not remarried or formed a new civil partnership. A lineal descendant includes a step-child, adopted child, foster child, child in the care of a kinship carer or child under guardianship, and that child’s first lineal descendants.
You should always seek advice about your specific requirements before you act. Speak to one of our experts on 0161 476 9000 or contact us here.