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US pension
Tax on distributions from overseas pension scheme.
My client is a 74-year old UK resident British citizen who worked in the US for many years before retiring before 6 April 2017.
To avoid penalties in the US, he must take required minimum distributions from his 401k retirement scheme, even though he does not need the money.
My question is whether these distributions are regarded as lump sums for pension scheme purposes so that they qualify for the 25% reduction for UK tax purposes?
Chapter 2 of Pension tax for overseas pensions (tinyurl.com/y5cpawef) states that from 6 April 2017 lump sums paid by non-UK pension schemes to UK residents will be taxable regardless of the type of pension scheme paying the lump sum. Further, if the non-UK scheme is registered, any lump sum will be taxable in the same way as lump sums from a UK-based registered pension scheme.
The required minimum distributions are taken by choice (only to avoid penalties) and will therefore become regular withdrawals from the scheme and I wonder if this might have an effect on their tax treatment in the UK.
I should be grateful for readers’ views on whether any part of these required withdrawals is exempt from UK tax.
Query 19,667 – Jaycee.
Horse riding
VAT on charity providing horse riding activities.
I am involved with a charity that helps disabled and disadvantaged inner London children ride and learn about horses from an early age.
Fees are charged to schools that send small groups of children for this type of therapy. The income generated does not cover the majority of the costs involved but, luckily, many adults volunteer to help. To raise the extra funds, various organisations and parents make donations and have done so for more than 30 years.
The charity also offers adult rides. They pay for lessons and also pay to ride them without instruction.
I have two VAT queries as follows:
- Is any of the income that the charity receives from the fees for adult lessons or just riding without instruction VATable? The income at present is below the VAT threshold.
- How to reclaim VAT paid or having supplies zero rated to save on costs?
I look forward to replies and advice from Taxation readers.
Query 19,668 – Treasurer.
Jamaican villa
Transferring ownership of a foreign villa.
My client who is both UK tax resident and domiciled bought a villa in Jamaica which he has since rented out. The rental profits have been fully reported on his UK tax returns and he has also notified the Jamaican tax authorities of this income.
However, he has recently transferred the ownership of the villa into a Jamaican registered company which will be managed and controlled here in the UK.
The client and his UK resident and domiciled wife are the directors of the company. Apparently, the sole reason for his actions were to simplify the Jamaican accounting and reporting.
My question is in three parts:
- I assume that his actions will have resulted in a transfer of assets abroad. Given that the sole reason for creating the company was for this purpose, will the transfer of assets abroad provisions still apply?
- If he is exempt from the transfer of assets abroad rules, does any declaration need to be made on the personal UK tax returns? Is it a case of making a ‘white space disclosure’ of the transaction and explaining why it is believed the transfer of assets rules do not bite in this situation?
- If he is caught by the transfer of assets abroad rules, presumably the rental profit is reported directly on his personal tax return. Does the company still need to report the income and, if so, does he obtain any credit for UK corporate tax paid?
Taxation readers’ thoughts would be appreciated here.
Query 19,669 – Marley.
Christmas tipple
VAT treatment of wine purchases.
I act for a client who is VAT registered as a sole trader. He buys and sells goods where there is a big profit to be made – his friends nicknamed him Arthur after the TV character Arthur Daley.
He has the chance to buy some high-quality vintage wine from a wealthy businessman who is looking to decrease the stock in his wine cellar. My client plans to do three things with the wine during the festive season:
- he is going to sell 80% of the bottles on his website for a profit;
- he will donate 10% of the stock to local charities for use as future raffle prizes or auction items; and
- he will give 10% away to family and friends as Christmas presents.
I understand from the landlord at my local pub that he can use the margin scheme to declare VAT on the sales – but this does not sound right. I thought that the scheme could only be used for cars and antiques. And are there any VAT issues with the donated bottles? They all exceed the £50 business gift limit.
Alternatively, as a result of his festive spirit with the free bottles and the fact that he is not a wine dealer, could we perhaps treat the whole deal as a private arrangement outside his VAT registration?
What do Taxation readers think?
Query 19,670 – Val.
