Find out what we have been answering for you this month…
Q
I would like to confirm the correct VAT treatment of services provided from overseas suppliers to a GB VAT-registered business with a UK place of residence.
From my understanding, where the service is provided by a company registered abroad, even if they have a GB VAT number, the treatment should be reverse charge. However, there are occasions where the service provider isn’t aware they are providing the service to a VAT registered customer, and they issue an invoice at 20% VAT. Should this then be processed at 20%, or should all services from abroad be marked as reverse charge? We want to ensure that clients aren’t reclaiming VAT in error.
A
In this case if the UK business is receiving supplies from a non-UK supplier the reverse charge procedure should apply despite the supplier being registered in the UK as a non-established taxable person.
VAT Notice 741A section 5.17 explains:
5.17 What to do if my supplier has a UK VAT number and raises a VAT invoice
If you receive a supply to which the reverse charge applies and yet your non-UK supplier issues a VAT invoice on a UK VAT registration, you must still apply the reverse charge as it is not an optional adjustment. You should advise your supplier to amend or correct their invoice appropriately.
Q.
Can I have please list of all products that can be sold in restaurants and supermarkets that is Zero and 5% rated. I also need guidance around rules and regulations around it.
A.
There is no generic list of products sold in restaurants and supermarkets and the VAT rate that is applied to each product however the following should assist:
He was an IT contractor company, shares 5% owned by husband, 95% by wife, both are directors. The company was active from February 2023 to November 2024, I assume therefore no BADR is available.
There is a surplus of around £120k in the company and the client wishes to use it to invest in buy-to-let.
Husband is now under PAYE and is a higher rate taxpayer, looking to avoid higher rates on rental income, wife also under PAYE earns £36k. Live in Scotland.
Is it better to use the existing company with the cash for the buy to let or set up a new company? If BADR was available would an MVL and then set up a new company to invest be an option? Or something else?
A.
Your clients wouldn’t qualify for BADR as the company hasn’t traded for two years.
I’m not sure of the rationale for the 95%/5% share split in favour of wife as husband presumably did all the work and wife has earnings anyway. However, as husband is presumably now doing a similar job through PAYE, HMRC may seek to apply the TAAR (Phoenixing) rules if the company is liquidated.
It would be safer to use the existing company for the property investment to avoid any potential issues. The higher rates of SDLT/LBTT will of course apply but interest relief available in full and presumably surplus income that isn’t needed can be accumulated within the company.
A business valuation isn’t just about numbers, it’s about ensuring you stay tax-efficient, compliant, and in control of your financial future. Whether you’re selling up, planning for the next generation, or facing an HMRC review, understanding when and why you need a valuation can save you from unexpected tax bills and missed opportunities. So, when exactly is a business valuation essential? Let’s have a look.
Selling Your Business
Thinking of selling your business? Before you do, you’ll need to determine its fair market value for Capital Gains Tax (CGT) purposes. An accurate valuation ensures you only pay tax on the real profit and can take advantage of tax reliefs like Business Asset Disposal Relief (BADR), potentially reducing your CGT to just 10%. However, it is important to note that the rates of BADR are increasing to 14% from April 2025 and 18% from April 2026. The right valuation could mean thousands in tax savings!
Inheritance Tax (IHT)
What happens to your business when you’re gone? If you own a business at the time of your death, it forms part of your estate and may be subject to Inheritance Tax. A professional valuation helps ensure that HMRC doesn’t overestimate the business’s worth, potentially reducing the tax burden on your heirs. Plus, certain business assets may qualify for Business Relief, which can significantly lower or even eliminate the IHT liability.
Gifting Shares
Thinking of gifting shares to family members ? Be aware that HMRC considers this a ‘disposal’ for tax purposes, meaning a valuation is required to determine if Capital Gains Tax applies. However, with careful planning, tax-efficient succession strategies can usually defer tax liabilities.
Employee Share Schemes
Offering shares to employees through schemes like Enterprise Management Incentives (EMIs) or Company Share Option Plans (CSOPs) is a fantastic way to motivate your team. But before you start handing out equity, you’ll need a business valuation to determine the fair market value of the shares. This ensures compliance with HMRC and prevents any unexpected tax demands for your employees.
HMRC Investigations
No one wants to be caught in a HMRC dispute over the value of their business. Whether it’s a challenge to your reported tax liability, a valuation for inheritance purposes, or a disagreement over a business sale, having an independent valuation in hand can be the key to defending your position and avoiding unexpected tax bills.
Mergers, Acquisitions & Restructuring
Merging with another company? Restructuring your business? Acquiring a competitor? A valuation is crucial for tax planning in these situations, as it determines how gains are reported, how goodwill is treated, and whether any tax reliefs apply. The last thing you want is a restructuring plan that leads to unnecessary tax costs.
Planning to retire? Before you step away, you’ll need a solid valuation to structure your exit in the most tax-efficient way possible. Whether you’re selling shares, transferring ownership, or liquidating assets, a well-timed valuation helps you minimise tax liabilities and maximise your financial return.
Don’t Leave It to Chance
A business valuation isn’t just a box-ticking exercise, it’s a powerful tool that can shape your financial future. Whether you’re selling, planning for succession, or facing an HMRC challenge, having an accurate valuation ensures you remain tax-efficient and legally compliant.
Next steps for your business valuation
If you need a valuation or have any queries in this regard, please get in touch. ETC can make sure you are prepared for whatever comes next so please get in touch.
