The Executors of the Estate of Nicolette Pawson have been denied leave to take their case to the Court of Appeal in relation to their claim for Business Property Relief (BPR) on the furnished holiday letting (FHL) property owned by the deceased. The executors claim was initially upheld by the First Tier Tribunal but that decision was overturned when HMRC appealed to the Upper Tribunal earlier this year. Leave to appeal was denied even though application was made in written and oral terms. Lord Justice Briggs said there was no realistic prospect of the appeal succeeding, because ordinary property lets did not provide sufficient additional services to qualify as a business. It will be interesting to see now whether furnished holiday...

The rate of corporation tax for small companies has been held at 20% by the UK since 1 April 2011. However, since this date the main rate of corporation tax has dropped and is due to continue to be reduced in line with the current government plans, as follows:- 2010   -      28% 2011   -      26% 2012   -      24% 2013   -      23% 2014   -      21% 2015   -      20% Of interest to the directors of profitable private limited companies, is the knock on effect which these reductions have on the 'marginal rate' of corporation tax (for businesses with taxable profits between the upper and lower limits), which are affected as follows:- 2010   -      29.75% 2011   -      27.50% ...

From 6 April 2013 the amount certain reliefs, including the following, are restricted per individual:- Sideways relief for trading losses against total income, (ITA 2007 s64) Post cessation trade relief  (available for certain payments made within seven years of the permanent cessation of trade); Property loss relief against general income and post cessation, Employment loss relief (available in certain circumstances where losses or liabilities arise from employment); Share loss relief under s131 ITA 2007, Losses on deeply discounted securities arising on losses on gilt strips and listed securities held since 26 March 2003; Qualifying loan interest (available for interest paid on qualifying loans including loa...

Disincorporation relief provides shelter, but only from corporation tax, for goodwill and land and buildings leaving a company. The assets must leave as part of the transfer of a whole business as a going concern via a distribution to non-corporate shareholders. It is important to note that there are potential income tax or capital gains tax charges on the shareholders on the distribution of the business, which needs to be managed. When Might Disincorporation Relief be of Use? - If the shareholders wish to separate trades to plan for a potential sale of one. One business could be left in the company and one distributed out - To assist in the facilitation of a demerger of two or more businesses to allocate them in whole to shareholders ...

Overview & Background to the ATED The annual tax on enveloped dwellings (ATED) was introduced in the Finance Act 2013 and is a new tax applying from 1 April 2013. High value UK residential properties that are owned by 'non-natural' entities (see below) could be subject to the ATED, which was introduced with a view to curbing the avoidance of stamp duty land tax (SDLT) through the practice of selling shares in a company owning a UK property, rather than the property itself. The non-natural entity will have to pay the annual tax where the value of the residential property was over £2m as at 1 April 2012, or if the property was purchased for more than £2m after this date. The tax payable is based on a banded rate depending o...

The self-assessment system means that it is the taxpayers obligation to register for tax returns with HM Revenue and Customs - but who needs to submit a tax return? Who Needs to Submit a Tax Return The tax rules state that all persons chargeable to income tax or capital gains tax that have not been issued a notice to submit a tax return by HMRC must notify their liability to tax unless certain exceptions apply (broadly speaking that all income is subject to PAYE or they are only subject to income tax at the basic rate). However it is perhaps easier to consider the occasions where a person may be required to notify HMRC and submit a tax return: - You dispose of assets resulting in a liability to capital gains tax (note - the disposal of ...

The General Anti Abuse Rule (GAAR) was introduced in the Finance Act 2013 and takes effect from 17 July 2013. A key issue for any advisors providing tax planning advice is now whether the strategy suggested is "abusive". If it is and HMRC are effective in implementing the GAAR the tax result of the transactions will be deemed to be what would have happened should a reasonable course of action been taken. All other tax rules will continue to apply.  In effect the GAAR will be HMRC's "back stop", if they consider the tax planning to be too good to be true and no other rules can charge the planning to tax in the way that HMRC would consider to be appropriate; given the intention of the legislation in question. HMRC's website provid...

In the recent case of Prest v Petrodel Resources Ltd the Supreme Court was asked to decide whether The Family Division of the High Court had authority to order companies to dispose of assets to an individual as part of a divorce order. Companies, solely owned by the husband in the divorce case, appealed against the Family Division's order for them to transfer properties worth £17.5m to the wife in the divorce case. In the Supreme Court Lord Sumption said that there were only three ways in which the properties could be made available in relation to the divorce order - The corporate veil could be lifted/pierced;  it was thought this could only happen if evasion was evident - If a power in the Matrimonial Causes Act could be enacted...

Background - what is BPR? Business Property Relief (BPR) is a valuable tax relief which can reduce the taxable value of business assets for inheritance tax purposes, potentially to nil. BPR is available in respect of transfers on death/in lifetime as well as inheritance tax charges during the lifetime of a trust (such as the 10 year charge or exit charge for trusts within the relevant property trust regime such as discretionary trusts). However, BPR is not available in respect of business assets where the business consists "wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings or making or holding investments" In practice this means that there is often uncertainty ...

The recent case of Russell Baker v HMRC TC02790 highlights the difficulties that arise where a company purchase of own shares does not meet the statutory requirements. It also highlights the importance of considering general legal principles in conjunction with the relevant tax rules. Case Summary The directors of the company fell out in 2005 in consequence of which the company undertook a company purchase of own shares in January 2006 to buy back the shares of one of the directors.  In return the director received total consideration of £120,000. HMRC raised an enquiry into the taxpayers 2005/06 tax return and concluded that the consideration of £120,000 was a distribution subject to income tax because the distribution did not m...