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Archives for Tax Advice

Inheritance tax advice for wealthy landlords

This client was referred to us by another firm of accountants in London. The client is a retired medical professional with a large portfolio of properties that had been acquired over the past 20-25 years at considerably low value but are now worth significantly higher. The client’s estate was in excess of £6 million which meant there was a potential inheritance tax liability at 40%. Our tax specialists were able to suggest tax planning structure that allowed for the properties to be effectively passed onto the children via a partnership without having to pay capital gains or inheritance tax as well as stamp duty. The tax planning structure is complex and not effective overnight. Instead in line with the legislation and HMRC guidance, the structure takes several years to take full effect but the end result is that the inheritance tax liability is either eliminated or substantially reduced.

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Tax planning for landlords

This case involved a group of new potential landlords / developers that needed tax advice on setting up a tax efficient structure for their future ventures. This was a wise decision as we have come across landlords and developers who do not think about tax advice until they have acquired the properties or in worst cases, until they have sold the property. Our team of tax specialists were able to put together an acquisition structure that prevents the new rules on tax relief on interest restriction from applying. In addition, as for the acquisition, we were able to suggest some reliefs that allowed a substantial reduction on stamp duty land tax (SDLT). The tax planning advice involved a holding company and subsidiaries and special purpose vehicles (SPVs) that can be used for different types of development / buy to let projects.

This tax planning implemented in advance can save significant tax liabilities in the coming years allowing the clients to use the excess cash (as a result of the tax planning) to be used in further acquisition / development projects.

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Certificates of Tax Residence

HMRC have updated their guidance on how to apply for certificates on tax residence which is applicable for individuals and companies that have overseas income. In order to be taxed in the UK, the overseas tax authority will ask for proof of UK tax residence which is in the form of a “Certificate of Residence” issued by HMRC. Here is a link to the updated guidance on tax residence on HMRC’s website.

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Capital Gains Tax Boston UK

Capital gains tax planning for properties

This client came to us seeking advice on mitigating capital gains tax on a property. We considered the client’s personal and professional circumstances in detail and explored various options allowing for the potential tax liability to be mitigated. We finally developed a strategy using legislation, HMRC’s guidance and extra statutory concessions which if carefully implemented would allow for the majority of the capital gains tax liability to be eliminated.

Our analysis: This was a complex case and required specialist knowledge of the legislation and HMRC guidance on various reliefs and exemptions. Seeking tax advice from a specialist firm may cost a little but the tax savings are very much worth it.

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Tax Investigations and Planning Seminar – 29 November 2018 – Glasgow

We will be hosting a free tax seminar at the Double Tree by Hilton, Strathclyde, Glasgow on 29th November. The following topics will be covered:

  • Tax investigations – latest developments
  • Tax case update
  • Budget 2018
  • Property tax planning

The seminar will provide specialist insight into the above areas. We are expecting bankers, business persons, solicitors and accountants to attend the seminar. The seminar qualifies for CPD points if these are relevant to you.

Refreshments and snacks will be provided.

If you would like to attend, please send an email to  seminar@churchilltaxconsultants.com to book a place.

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Budget 2018

Here are some of the selected key budget announcements from a tax adviser’s perspective:

Annual Investment Allowances (AIA): AIA have been increased from £200,000 to £1 million from 1 January 2019. This increase is being allowed for a period of 2 years. The AIA gives 100% tax relief on plant and machinery in the year of acquisition instead of the normal capital allowances that reduce each year. Transitional rules will apply for periods spanning 1 January and any periods ending after 1 January 2019 will receive a proportionate increase. This relief can be very useful for companies that invest in plant and machinery each year or are planning to incur significant costs in the coming two years.

Entrepreneur’s Relief: There will be two important changes to Entrepreneur’s Relief:

a. The qualifying period of 12 months ownership has been extended to 24 months from 1 April 2019. Entrepreneur’s relief allows individuals to be taxed at a reduced rate of 10% instead of the         normal capital gains tax rates on disposal of an interest in a business or shares in a trading company.

b. To qualify for the relief, an individuals must be an employee or a director of company and own 5% or more of the voting rights and share capital of the company. From 29 October 2018, they must also be entitled to 5% of the company’s distributable profits and net assets.

Principal Private Residence Relief: There will be two important changes to PPR relief with effect from 6 April 2020

a. Currently, the final 18 months of ownership of a property which had previously been used as a main residence were deemed as the period of residence. The final period of deemed residence will now be restricted to 9 months

b. The letting relief which allows up to £40,000 of the gain (relating to a period the property was let) to be exempted will be restricted to the periods where the owner jointly occupies the property

Non resident landlords:

a. Currently non resident landlords are chargeable to capital gains tax on sale of residential properties only. This will be extended to commercial properties from 6 April 2019

b.Non resident corporate landlords will be subject to corporation tax at 17% instead of the normal 20% from 6 April 2020

Research & development tax relief:

Currently small and medium businesses that are not paying any tax can surrender their tax losses to HMRC in exchange for an unrestricted cash credit. Under the proposed changes, this cash credit will be limited to three times the PAYE and NICs liabilities of the business for the accounting period in which the qualifying research and development cost has been incurred. This change is proposed to come into effect from 1 April 2020.

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Corporation Tax Boston UK

McFarlane [2018] TC 06512 – Tax Tribunal case lost for deliberate behaviour

The First Tier Tribunal judge found in this appeal that there was a valid discovery and the appellant’s actions were considered deliberate. The appellants agents FTR Accountants Company Limited had made a series of mistakes and errors in the appeal process and did even turn up to the hearing with the excuse that they had got their diaries wrong. This case demonstrates the importance of cooperating with HMRC from the outset and to ensure the formal appeal process is adhered to by the agents as any mistakes could prove to be costly.

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VAT Boston UK

Tax fraudster jailed for VAT repayments

David Handley, aged 43, from Leicester has been jailed for four years for VAT repayment fraud. Mr. Handley was the mastermind behind a gang of 18 people using forged identities to set up businesses and claim more than three hundred fraudulent VAT refunds. In his supervision, Mr. Handley had set up almost 46 illegitimate businesses purely to claim tax from HMRC. Read more…

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Positive ruling from HMRC on capital gains tax liability

This client came to us on recommendation from East London. The client had transferred a property to their relative as part of an ongoing internal family arrangement. On the face of it, there was a transfer between connected people and therefore subject to a substantial capital gains tax liability. We considered the case and background and found that the person to whom the property was transferred had retained beneficial ownership of the property throughout the period of ownership by the nominee owner and that there was a deemed trust in place. We discussed the idea with our client and applied to HMRC for a ruling that there was no tax to be paid considering the structuring of the ownership. After waiting for approximately 8 weeks, we received a positive ruling from HMRC confirming that our technical analysis of the ownership structure and of deemed trust was correct and therefore no capital gains tax was payable. This was great news for our client as a potentially substantial tax liability was no longer payable in accordance with the tax legislation.

 

Our analysis: This was a complex matter and required in depth specialist knowledge of the tax legislation and legal/ beneficial ownership structures. Whilst a tax specialist will no doubt cost more than an ordinary accountant but can bring much larger savings in tax. In this case the additional fee was a fraction of the tax savings brought for our client.

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