Where a person sells their home the gain is typically exempt from capital gains tax under the private residence relief (PRR) provisions (formerly known as principal private residence relief or PPR). Private residence relief is available on the sale of the taxpayers only or main residence,with the amount of relief being determined based on the length of ownership as compared to the length of occupation although certain periods of deemed occupation may also qualify for relief. However, the recent case of Moore v HMRC TC 02827 acts as a reminder that occupation by itself is not sufficient to make a house a home - or more specifically a 'residence' for capital gains tax purposes. Case law demonstrates that in order for a house to be a ...

HM Revenue & Customs (HMRC) have confirmed that they are to write to all UK tax residents that claimed the remittance basis in their 2011/12 tax returns. The remittance basis is available to UK residents that are non UK domiciled and allows the taxpayer to pay UK income tax and capital gains tax only on foreign income and gains that are remitted to the UK (in comparison the normal rule is that a UK resident is liable to tax on their worldwide income and gains). Prior to 6 April 2013 the remittance basis was also available to UK domiciled taxpayers provided they were non ordinarily resident in the UK.  However, the concept of ordinary residence was abolished most tax purposes in the Finance Act 2013. This letter is being describe...

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...

Where a person pays tax in both the UK and abroad, the general rule is that double tax relief may be available up to the lower of (i) the UK tax on the doubly taxed income, or (ii) the foreign tax on the doubly taxed income. However, there are a number of issues that should be considered before making a claim for double tax relief: 1. Is there a double tax treaty with the country concerned? Double tax relief may be available through either a double tax treaty or through statute where there is no double tax treaty with the country concerned. Where there is a double tax treaty in place, this may affect the amount and mechanism of the relief. 2. Does the double tax treaty cover the relevant tax? For example, the UK current...

Overview of Entrepreneur's Relief Entrepreneur's relief is available on the disposal of qualifying business assets and shares and allows the taxpayer to claim a reduced rate of capital gains tax of just 10% (compared to 18/28% for basic/higher rate taxpayers). Since 6 April 2011 entrepreneur's relief has been available on up to £10 million of gains - this is a lifetime limit which applies per person. The relief is therefore very valuable and is often utilised by business owners. In order for the relief to be available a number of conditions must be met - the relevant conditions will depend on the type of asset being disposed of and who is disposing of the assets. Entrepreneur's relief can also apply to certain trusts such as the tr...

The Budget releases of 2013 included an unexpected anti-avoidance rule for Inheritance Tax. The new rule is that liabilities must be set against the property that the funds were used to acquire.  The effect this rule is that loans taken out to invest in assets that reduce the net value of the estate such as Agricultural Property Relief (APR) and Business Property Relief (BPR) will not be deductible from the IHT estate. This rule will be operative from the date on which the Finance Bill receives Royal Assent.  However, many commentators had pointed out that it was structured in a retrospective manner as it would affect the estates of people who died after Royal Assent but who had taken out loans, in good faith, many years ago. ...

A US Limited Liability Company (LLC) is treated as a partnership for United States tax purposes.  That is, a US person who is a member of the LLC has a direct interest in the LLC’s assets and activities. However, the tax treatment of an LLC for UK tax purposes has been debated. The ongoing test case is George Anson v HMRC (also known as Swift Case), which was found in favour of HMRC in the Court of Appeal in February 2013.  It was found in favour of HMRC in that it was held that US LLC’s are opaque for UK tax purposes,  in essence akin to a company for UK tax purposes.  The reason for this decision was primarily because the LLC could make its own decisions, independent of its members. We have advised a client in the past m...