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Meeting Points
RALPH RAY CTA (Fellow), BSc (Econ), TEP, solicitor, consultant with Wilsons of Salisbury reports highlights from the CIOT Finance Bill conference held on 14 June.
Meeting Points
RALPH RAY CTA (Fellow), BSc (Econ), TEP, solicitor, consultant with Wilsons of Salisbury reports highlights from the CIOT Finance Bill conference held on 14 June.
Private residence relief
| Emma Chamberlain BA, TEP, barrister looked at the effect of the transitional arrangements to restrict principal private residence relief where a holdover relief claim was made prior to 10 December 2003 and the trustees have not yet disposed of the property. |
| Example |
| John transfers Nut Hatch which has never been his main residence into a discretionary trust (non-settlor interested) in December 2002. The gain of £200,000 is held over. The trustees allow Harry, his son, to occupy the property as his main residence from April 2003 until December 2004. The property is sold by the trustees in January 2005 realising a total gain of £250,000. Because the trustees' allowable expenditure was reduced as a result of John's holdover relief claim, and the gift into trust was made before December 2003, the transitional rule applies. The trustees have owned the property for two years and main residence relief can be claimed on one year's ownership. |
| Therefore approximately half the gain of £250,000 is exempt from tax. The remaining half is chargeable. Note that the last 36 months exemption is available to cover the period from January 2003 to April 2003 when Harry was not in occupation, but not the period from December 2003. |
| In some circumstances it may be preferable and permissible for the settlor to revoke any holdover claim if the gain arising since the transfer into trust has been more than the gain originally held over. |
One set of rules
| Stephen Ward ACII, APMI, MSFA, AIFP spoke on pension simplification. |
| One set of rules will be applicable to all types of pension scheme. It will no longer be necessary to choose between membership of a personal pension scheme and an occupational pension scheme. Anyone will be able to join any type and any number of pension schemes at any time. |
Settlor-interested trusts
| A settlor-interested trust is defined as one where 'any property which may at any time be comprised in the settlement or any derived property is or will or may become payable to or applicable for the benefit of the individual or his spouse in any circumstances whatsoever' said Emma Chamberlain . |
| Note that references to a spouse do not include a spouse from whom the settlor is separated, nor a widow or widower. This is contrasted with the terms of the pre-owned assets legislation. |
| There is a very wide definition of 'settlor interested'. An example is paying set up costs as a term of the trust. The condition applies if any person who is a settlor has an interest in the trust, not just the person making the disposal. If a beneficiary becomes the settlor in respect of a small amount of trust property, then clawback applies to the transferor. |
| Example |
| Mr A wishes to reset the taper relief clock on his commercially let land. If he transfers the land into a discretionary trust from which he cannot benefit, but in the fourth year his daughter who is a beneficiary adds funds to the trust, the relief is clawed back. |
Resetting the taper relief clock
| Emma Chamberlain said there is no business asset taper relief available on disposals of most investment assets with one notable exception: let commercial property used in the trade. Property let to an unlisted trading company can qualify for business asset taper relief on or after 6 April 2000; any let property used in the trade by an individual or partnership can qualify for business asset taper relief with effect from 6 April 2004, even if the owner has no interest in the trade. The apportionment provisions will still apply. |
| Example |
| Mr A owned some farmland let to a neighbouring farmer. The neighbouring farmer has no connection with Mr A — they are not partners. The neighbour farms the land in his trade. Mr A will not get business asset taper relief until 6 April 2004 but will receive it thereafter. If Mr A sells on, say, 7 April 2005 having owned the land since, say, 1 March 1998 the gain will be apportioned as follows: |
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