Owners of stately homes are a fairly rare breed but those that open their doors to the public will be considering whether they can benefit from a recent Court of Appeal Case. The ongoing saga of HMRC v The Executors of Lord Howard of Henderskelfe recently reached the Court of Appeal.  The taxpayer came out on top again in this round of judgements having previously being successful in the Upper Tribunal and High Court.  With a lot of tax at stake it is likely that HMRC will appeal the decision to the Supreme Court, but we must wait to see.  HMRC had been provided with initial encouragement after a win in the First Tier Tribunal. Crux of the Case The late Lord Howard's estate sold a 'Old Master’ painting by Sir Joshua Reynolds for...

Key Points from the Budget 2014: Pensions - From April 2015 all tax restrictions on the amount that pensioners may withdraw from their pension pots will be removed, thus removing the need to buy an annuity. - Taxable element of pension pot to be taxed at marginal rate of tax (rather than the current 55% tax rate) from April 2015. - Amount that may be withdrawn from pension as a lump sum to be increased to £30,000 from 27 April 2014. - Increase in age that people can access their pension pots from 55 to 57 in 2028 Personal Tax & IHT - Increase in personal allowance from £10,000 in 2014/15 to £10,500 in 2015/16 for those born after 5 April 1948 - Higher rate threshold set at £41,865 for 2014/15 and £42,285 for 2015/16...

See our Spring 2014 Tax Update for more recent cases. Arctic Systems paved the way for shares to be held, for example, by a spouse that doesn't work in the business.  However, its protection is not all encompassing. An example of a weak structure for cash extraction was provided by the recent First Tier Tribunal Decision of Donovan and Mclaren v HMRC (TC03188).  Two couples owned the share capital in a trading company between them.  The Tribunal heard that, on a regular basis, the husbands waived rights to dividends declared on their class of share.  It was found that the dividend waivers were made so that their wives received a relatively higher level of dividend than the husbands would.  This would aggregate the couples' join...

See our Spring 2014 Tax Update for more recent cases. Case outcomes in relation to Entrepreneurs' Relief are always of significant interest given the "Holy Grail" 10% tax rate potentially available. Jeremy Rice v HMRC [2014] UKFTT 0133 (TC)) tested whether the disposal of a property occured within three years of the cessation of the tax payer's sole trader business (TCGA S169I(4)). If it did then entrepreneurs relief would be available to reduce the CGT bill on the sale of the property by around £21k; this is because the sale of business assets within 3 years of the cessation of that business qualifies as a "material disposal of business assets". A lot of the discussion within this case centred around whether Mr Rice's car tradi...

See our Spring 2014 Tax Update for more recent cases. The First Tier Tribunal has recently heard two cases posing different questions as to whether shares are of negligible value. Brown v HMRC TC03118 Losses which accrued by a company over many years meant that it could no longer pay dividends to its shareholders. Mr Brown owned shares in the company and he said, therefore, that they had become of negligible value and he claimed a loss on his tax return. HMRC countered by suggesting that the shares still had value because another shareholder had been lending money to the company to support its trade and whilst this occurred there remained the possibility of the company returning to profit. The Tribunal's verdict was that it wasn't ne...

See our Spring 2014 Tax Update for more recent cases. The Options & Deadline Imposed by HMRC HMRC have sent letters to approximately 5,000 UK taxpayers with Swiss bank accounts, requesting a response by 28 February 2014. More letters are expected to be sent in the coming months. Those that do not respond by the deadline risk a full tax enquiry. This includes even those that have no UK tax to pay or have previously declared the income to HMRC. Taxpayers in receipt of these letters are offered three alternatives which must be confirmed by signing one of three enclosed certificates: to confirm that they have no outstanding tax to pay in relation to their Swiss bank accounts; that they have used, or intend to use the Liechtenstein...

See our Spring 2014 Tax Update for more recent cases. Business Property Relief (BPR) is a valuable inheritance tax relief, offering up to 100% relief against inheritance tax on qualifying business assets. The CIOT, STEP and the ICAEW Tax Faculty have recently released technical guidance regarding the availability of Business Property Relief (BPR) for inheritance tax in certain situations. The guidance has been approved by HMRC and therefore represents HMRC's current thinking on various issues. Key points from the guidance include: - Holdings of Surplus Cash by Trading Companies The recent economic climate means that many companies are retaining higher cash reserves than would previously have been the case. This cash is ...

Securing the 10% rate of tax through Entrepreneurs' Relief generally forms a significant goal for an owner who wishes to exit their business. PD Tax Consultants are assisting with the succession of a family trading business, with dad wishing to sell his shares back to the company. As is the case with a number of businesses, a good deal of surplus cash has built up in the company through many years of trading and some of this cash has been placed in a bond.  The trade remains in a healthy state with good profits and relatively significant turnover. So whilst the surplus cash is a significant asset on the balance sheet, the income it and the bond are generating is less than 1% of the company's total income. We recently asked HMRC ...

The recent case of Paul Gibson v HMRC (TC03021) provides some interesting points in relation to capital gains tax and Private Residence Relief. Brief Facts Mr Gibson bought a property called Moles House, which he lived in as his main residence. Through a number of convoluted arrangements with a friend, and his then girlfriend's  parents, Mr Gibson decided to demolish the house and build a new one on the plot. After the plumbing had gone in on the new house he was described as living there in a "camping" existence. Soon afterwards financial difficulties meant the house was sold, overall for a gain. The gain was not declared on his tax return, as Mr Gibson believed he had sold his main residence. The tribunal was asked whether P...

The government has announced two important changes to capital gains tax (CGT) in the Autumn Statement 2013: 1. Private Residence Relief (PRR) Formerly known as Private Residence Relief or PPR, this relief exempts the gain arising on a sale of a persons only or main home. Broadly speaking, the exempt element of the gain is calculated by comparing the period of ownership to the period of occupation. However, there are a number of important extensions to the relief, known as periods of deemed occupation. Perhaps the most useful of these is that where a person has at any time lived in the property as their sole/main residence, the gain attributable to the last 36 months of ownership will automatically be exempt from CGT. From April 2014...