June Question and Answer Corner

Newsletter issue - June 07.

Q. I started a new business last year and have only just begun to make profits after a year of losses. Can I set the losses made in the first year against the profits made in the second year?

A. Yes you can, but if your business is run as a sole-trader rather than through a company you can set the first year losses back against your other income made in the four years before you started the business. If the business is operated through a company the use of losses is more restricted as they can only generally be set against income made by the same company in the future.

Q. Before I married I lived in a small flat, which is now let. I would like my wife to receive the income from this flat to use up her personal tax allowances, as she is no longer working. How can I arrange this?

A. To share the income from the flat the property must be held in your joint names. Ask a solicitor to transfer ownership of a defined share in the property to your wife. There will be legal charges and possibly Stamp Duty Land Tax to pay if the property is subject to a mortgage.

Q. I am setting up a cafÃ© in a local gym to sell hot and cold drinks including fruit smoothies made on the premises. Do I have to charge VAT on the smoothies?

A. Assuming you are or need to be registered for VAT, then Yes. Smoothies and juices are a drinks subject to standard rate VAT. If you sell the fruit unprocessed it is a zero-rated food.