Tax Partner Pro – Answer to your question on August 24
Q
I have a client who is a supervisor and paid on PAYE. When I do the self-assessment checker, the last question asks if they are proctoring and then says they need to do a self-assessment.
I don’t understand why because they are on PAYE. Can you please clarify?
It also appears that supervisors can claim travel expenses to get to work, etc.
A
Yes, it’s true.
If you are an examiner, an exam moderator (I’m not sure how this is different), or a proctor, you should complete a self-assessment.
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Q
We have a client who owns 2 furnished vacation rentals and is selling one.
The property meets the criteria to be an FHL and has been rented as such for over 2 years, but I understand there may be a problem if only 1 of the 2 is sold?
Is this correct, if so is there anything we can do to ensure that BADR applies?
A
That’s right, the issue at hand is that the BADR terms for a sole trader must ensure that all or part of the “business” is sold.
There is no other way to claim BADR, as this is the condition that will be relevant to your client in this case. The other conditions relate to the sale of shares of a company or an interest in a company.
Therefore, when your client sells a single property within the FHL business, it must be argued that this “part” of the business can be operated separately. It depends on the facts of the case.
It would be necessary to demonstrate on the basis of the facts that the goods sold constitute a separate, distinct and clearly identifiable part of the overall business of FHL and not a simple asset of the company which does not in itself constitute a viable business in its own right. whole. . For example, if someone owns multiple properties across the UK they are more likely to be eligible than someone who sells one unit from one location and owns 5 other units which you have continued to operate .
If very similar properties are rented in each location, there is considerable overlap in the types of guests staying there, and the properties are largely run as a single business, then it may be more difficult to demonstrate that the sale One of them would be the sale of part of a business.
However, if the properties are of different sizes – for example, a two-bedroom property in one location has been sold while the other property is operated as a four, five or six-bed property – and it can be clearly demonstrated that both the customer base and the marketing and advertising approach are different, then BADR should be available.
It is important that if you believe that BADR is available based on the facts, a disclosure is made to that extent in the client’s tax return, presenting the reasons stated above and applying the facts.
You should also take note that there is a plan to abolish the FHL regime from 6th April 2025, so if they sell after this point they may not be eligible for BADR at all and potentially be taxed at the CGT residential rate. However, due to the change in government, we are waiting to hear the results of these proposed plans.
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Q
- One of our clients, “Company A”, is owned by a holding company registered in Kuwait. The company currently operates two stores: a coffee shop and a cigar store. We plan to create a new company and transfer the cigar store, along with all of its assets and liabilities, to this new company. The new company will also be owned by the holding company.
Could you please advise us on the tax implications of moving the cigar store to the new company?
- In addition, the holding company has another subsidiary, Company B, also registered in Kuwait. In the near future, Company B will acquire 100% of Company A. What will be the tax implications if Company B acquires full ownership of Company A?
A
I have added some initial comments below which I hope will help you in the short term – you will understand that this is only a high level view and we have not looked at the situation in detail – if you or the client would like more formal advice then we would be happy to provide you with a quote for the work.
- As the current company and the new company are both part of the same wholly owned group, there should be no real UK tax issues:
- From a CGT perspective, all assets can be transferred within the group 100% tax free – the new owner simply assumes the basis cost of the old company.
- The same goes for any good will, etc.
- From the point of view of capital deductions, assets are transferred at their tax-depreciated value.
- All tax losses associated with the store must be transferred with the trade
- From a VAT perspective this should be a transfer of activity, therefore outside the scope of VAT (I assume the new company will also be VAT registered)
- Stocks, etc. can be chosen to be transferred at cost
- If land or buildings are moved, they should receive group stamp duty relief.
Probably the only thing to check is to make sure the Kuwaiti entity is actually considered a business by HMRC – I don’t see why it wouldn’t be, but certain types of entities may be treated differently by HMRC . If it is a company with shares as we would recognize them, it is likely to be considered a legal entity by HMRC..
- Again, given that the move is within a 100% owned group of companies, there should be no issues.
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Q
Husband/wife Ltd company – 50/50 shareholding. 2 stocks they have been trading for several years – yield about 60,000 per year – pay out 40,000 dividends and keep 20,000.
They want to bring their daughter as a 1/3 partner – this will create another share and another gift for her.
The company has net assets of 50,000 and the stock will pay dividends – so if we say for example that the co is valued at 75,000,
She therefore receives a share worth $25,000.
Is there any immediate tax implication for CGT etc? – if this is the case, can a hold request be used.
A
If the transfer were to take place and the customer did nothing, then yes, CGT would apply to the transaction as it is a material transfer of value to a related person.
However, as it is a trading company, a gift withholding can be entered into between the transferor and the transferee to transfer the gain into the beneficiary’s shares, so that the CGT would fall on the beneficiary as it occurs. that he would dispose of the shares. .
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