Do you pay SDLT on Properties Transfers within a Group? 2

Finance Act 2003 Schedule 7 has the answer

http://www.legislation.gov.uk/ukpga/2003/14/schedule/7

Many Properties Transactions within Groups of Companies are Exempt from SDLT

SCHEDULE 7
Stamp duty land tax: group relief and reconstruction and acquisition reliefs

Part 1

Group relief
1(1)A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group.
(2)For the purposes of group relief—
(a)“company” means a body corporate, and
(b)companies are members of the same group if one is the 75% subsidiary of the other or both are 75% subsidiaries of a third company.
(3)For the purposes of group relief a company (“company A”) is the 75% subsidiary of another company (“company B”) if company B—
(a)is beneficial owner of not less than 75% of the ordinary share capital of company A,
(b)is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of company A, and
(c)would be beneficially entitled to not less than 75% of any assets of company A available for distribution to its equity holders on a winding-up.

steve@bicknells.net

 

The 2019 Loan Charge for disguised remuneration Reply

HMRC are getting tough on those who seek ways to avoid tax and the schemes are often treated as Tax Fraud.

The Finance (No. 2) Act 2017 contains some of the most significant changes to tax legislation in recent memory (the 2019 Loan Charge).

The legislation which is retrospective targets Employee Benefit Trusts, Employer Financed Retirement Benefit Schemes, Contractor Loans and many others where an employee was rewarded with a loan from the employer or a trust, but in realty the employee was never going to repay the loan and just wanted tax free money.

The 5th April 2019 Loan charge will require Income Tax and National Insurance to be paid on the balance outstanding, as most of the loans will be high value that probably means 40%/45% income tax and Employee NI at 2% and Employers NI at 13.8%, so that could be 45% + 2% +13.8% = 60.8% tax on the loan, plus possible interest and penalties

How re-describing loans is claimed to work

Scheme users are being told they can sign documents saying that the sums they’ve received from their disguised remuneration scheme under loan agreements are not loans at all. Instead, these sums of money are merely held by them in a ‘fiduciary capacity’ – for example, an individual acts in a fiduciary capacity if they hold money, or assets, for the benefit of someone else, not themselves.
It’s wrong to claim that the loan charge won’t apply because the sums received aren’t loans.

Why you shouldn’t use this scheme

Renaming something now doesn’t change what happened in the past. Attempting to describe a loan as something else doesn’t mean it’s not a loan.
The loan charge will apply to more than just loans, including any form of credit or other right to a payment regardless of what it’s called. If you adopt this approach and choose not to reflect the loan charge on your tax return you may face a significant penalty in addition to the tax charge.
Deliberately misleading, or concealing information from HM Revenue and Customs (HMRC) may result in criminal prosecution.

https://www.gov.uk/guidance/disguised-remuneration-re-describing-loans-spotlight-39

The Options

  1. Repay in full before the 5th April 2019 – but be aware that if the company distributes money to you it may be taxable
  2. Settle with HMRC

Doing nothing is not an option, its likely you lead to bigger penalties and possible legal action.

The Advice from HMRC

Any arrangements to avoid the loan charge, which seek to deceive HMRC as to what is really happening, may be fraudulent.

A number of previous cases promoted as being compliant and legal have resulted in criminal convictions for the key people involved and extensive investigation of several hundred users. HMRC will investigate all of these arrangements and is likely to take similar action if it finds any that are seeking to deceive. At the very least, anyone who takes part in an offensive arrangement is likely to face penalty sums, chargeable along with any tax and interest that will be due.

Tax avoidance doesn’t pay. Most arrangements simply don’t work and people can end up paying more than they were trying to avoid. Users may have a long-term requirement to deal with the cost, commercial and tax fallout from these transactions with no support from the promoter of the original arrangement. If users are worried about their financial position, it is better to contact HMRC rather than risk more investigation and what is likely to be a larger bill.

steve@bicknells.net

Personal MTD postponed but MTDfB will not be delayed Reply

Last week it was announced that due to Brexit some of HMRC’s plans have had to be put on hold, so they have decided that Digital Services for Individuals would be put on hold.

HMRC’s email stated: ‘We have made the decision to delay plans to introduce further digital services for individuals, to release project capability to EU Exit work. This means halting progress on simple assessment and real time tax code changes.’
‘We will pause work to digitise services that impact fewer numbers of customers, such as those paying Inheritance Tax, or applying for Tax Advantaged Venture Capital Schemes and PAYE settlement agreements.’

But Making Tax Digital for Businesses will not be delayed, so from 2019 VAT will be the first stage then Business Tax potentially starting in 2020.

Come to one of my seminars to find out more

steve@bicknells.net

 

 

 

 

Are Flat Management Service Charges Taxable? Reply

The rules for service charge accounts are set out in Tech 03/11

Service Charges are designed to pay for management, repairs and maintenance, they are not intended to make a profit and so will not generally incur a tax charge.

If, however, they include Interest or Ground Rent potentially there could be a taxable profit.

Service Charges in accordance with ICAEW Technical Release Note 03/11 are accounted for outside of the company and are a type trust account.

steve@bicknells.net

 

Are Free Lease Extensions Taxable? Reply

As with so many things the answer is may be!

Many Freeholds are owned by a Company in which the tenants hold the shares.

When the Company was set up to buy the freehold often the tenants will grant new long leases as part of the purchase process and have their articles of association changed to set out their entitlement to leases. The lease terms are often different lengths and values so you could have £1 voting shares and then separate non voting shares for the payments above the £1 at the time the company buys the Freehold.

In order to offer free extensions in the future the company would be set up as a Bare Trust for the tenants/nominees, this could allow the company to issue free lease extensions.

However, if this wasn’t done then a company would normally be expected to charge arms length market prices for leases or for the lease to be taxable on the tenant as a distribution or benefit.

steve@bicknells.net

 

Tax Strategies for 2018-19 Reply

Could you be paying more tax than is necessary?

With the UK economy forecast for growth, now is a good time to carefully plan your finances. It is essential to regularly review your plans to ensure that you are on course to achieve your business and financial goals.

Click on the image above to download our report

 

steve@bicknells.net

Beware of fake HMRC Texts and E Mails Reply

Clients regularly tell me they have had Messages from HMRC, some are almost believable!

HMRC will never notify you of a tax rebate by email or text. HMRC also won’t ask you to disclose personal or payment information by email or text.

If you have the slightest doubt that a HMRC email or text is fake, my advice is:

do not open attachments, they could contain a virus
do not click on links, they could take you to a fake HMRC site
do not disclose personal/confidential information
forward suspicious HMRC text messages to 60599 (charged at your network rate)
forward suspicious emails to the HMRC phishing team at, phishing@hmrc.gsi.gov.uk
check our security guidance: Dealing with HMRC Phishing and scams.

If you think you have disclosed personal information in response to a scam HMRC email or text, act immediately. Contact the HMRC security team at, security.custcon@hmrc.gsi.gov.uk, provide brief details of what you disclosed (e.g. name, address, HMRC User ID, password). Do not give your personal details in the email.

Protect yourself by reporting your suspicions to us and promoting our cyber security messages.

You can also report incidents to Action Fraud.

steve@bicknells.net

 

Can I move income from my investment to my spouse? Reply

We have covered this topic before in Are property transfers between spouses taxed?

That blog discussed Capital Gains and SDLT.

We also explained the process in this blog How do you share property ownership income between spouses?

That blog covered Form 17 and Declaration of Beneficial Interest

Today there was a great blog from Croner Taxwise that I wanted to share it

Can I assign the income from my investment property to my spouse so it is taxed at a lower rate?

A. Due to the abundance of legislation that applies to land transactions and gifts, various tax implications are of concern.
Where only an income stream is transferred and the transferor retains an interest in the capital value of the property generating the income, the income is treated for income tax purposes of the income of the transferor under the settlement legislation at ITTOIA 2005 s.624.
To effect a transfer of the income stream and achieve the client’s objective, the transferor must also transfer a proportionate capital interest. To transfer 50% of the income stream effectively, a 50% interest in the capital value of the property also must be transferred.
Capital assets are transferred between spouses at nil gain or loss for capital gains tax purposes. The deemed consideration is so much as would secure a net gain of £0 after accounting for enhancement expenditure, costs to transfer, etc. There are exceptions to this rule where the spouses are not living together so do not assume tax neutrality will apply.
Take additional care where the property in question was previously the main residence of the transferring spouse, as private residence relief may be inadvertently lost. A transferee spouse will only acquire the ownership and occupation history of the transferor where the property is transferred whilst it is the main residence of both spouses (TCGA 1992, s.222(7)). If the property is not their main residence, a gain which would have been 100% relieved in the hands of the transferring spouse will come into charge on a future disposal by the acquiring spouse.
The final tax charge to consider is Stamp Duty Land Tax. There is no exemption from SDLT for transfers between spouses. SDLT is chargeable where the acquiring spouse provides consideration for their interest in the property, including assuming liability for debt.
Although not technically a tax issue, it is of note that a transfer of beneficial ownership of a property does not require a conveyance of legal title. Although a trust arrangement does not need to be written to be effective, a written declaration which is signed and dated can prevent disputes with HMRC over the validity and commencement of the transfer, particularly where income continues to be deposited into a joint bank account.

 

steve@bicknells.net

 

How do you de-register for CIS? Reply

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors must register for the scheme. Subcontractors don’t have to register, but deductions are taken from their payments at a higher rate if they’re not registered.

HMRC make it easy to join CIS but its hard to find the instructions on how to leave or cancel CIS.

For those who have struggled to find the instructions here they are

https://www.gov.uk/what-you-must-do-as-a-cis-contractor/tell-hmrc-about-changes

If you stop trading or using subcontractors

You must:

tell HMRC

stop filing monthly CIS reports

Do this even if you’ve stopped using subcontractors temporarily, for example because you’re using your own employees to carry out work.

In general I find a letter works best as you can send it recorded delivery and prove it was sent, you write to this address

National Insurance Contributions and Employers Office
HM Revenue and Customs
BX9 1BX

steve@bicknells.net

It’s Official! — Bournemouth Chamber of Trade & Commerce Reply

 

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via It’s Official! — Bournemouth Chamber of Trade & Commerce