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Freeholder
Relief available on forced sale of property
Our client is the owner/director of a residential property investment company with a portfolio of more than 20 properties.
The company has received notice of enfranchisement from the tenants of one of the properties to exercise their right to acquire the freehold of the premises under Leasehold Reform, Housing and Urban Development Act 1993, s 13.
I read the article ‘Looking for relief’ by Barrie Akin (Taxation, 7 September 2006, page 630) which suggests that rollover relief may be available under TCGA 1992, s 247, s 247A and s 248, even though this relief was designed for compulsory purchase orders. Could readers advise if this applicable to my client’s circumstances?
The same director client also has a residential property trading company.
Are readers aware of any relief for a similar forced sale of a residential property bought with a view to resale in the short term and therefore held as trading stock?
I look forward with interest to receiving replies.
Query 19,463 – Pertwee.
Afterlife
Life policy to purchase deceased partner’s shares
My client entered into a life assurance policy in 1992 which would pay out, let’s say, £1m on his death.
His two partners have also entered into similar policies.
The proceeds of my client’s policy will be held by the trustees (my client and his wife and daughter) for his two partners who are alive on the payment date.
The sum would then be used to buy my client’s one-third share of the partnership.
The life assurance policy also mentions that if he shall cease to carry on the business in partnership then his partners’ interest will cease and the policy will be held for himself absolutely.
In the partnership agreement an option has been granted to the surviving partners to buy the shares of the deceased partner at market value.
I am seeking guidance on the following:
- If my client’s partnership share on a market valuation basis is for £500,000, for example, then do the trustees give only £500,000 to the remaining partners and keep £500,000 for the benefit of his estate?
- Do the trustees give £1m to the remaining partners and they purchase his shares for £500,000 and the remainder is a windfall for them?
- Do the trustees give £1m to the remaining partners and they purchase his shares for £1m?
I would also welcome advice in the scenario that my client is no longer in practice as a partner on the date of his death:
- Are the policy proceeds of £1m considered to be part of his estate for inheritance tax purposes?
- If so, is it then possible to hold the proceeds in trust for the benefit of his two adult children, so that they do not form part of his estate for inheritance tax purposes and they inform the insurance company now about it?
I hope readers are able to provide some advice here.
Query 19,464 – Partnership Protector.
Two for one?
Stamp duty surcharge payable on a combined property?
I have a client who is buying a home in a retirement complex.
The apartments being offered are not considered large enough so they are purchasing two adjacent apartments with a view to making them at least connecting, if not a single unit.
Although they would both have separate deeds, are there circumstances where this could be considered a single purchase of a replacement home, or will it be the case that my client will be required to pay the additional stamp duty 3% surcharge on the second apartment?
Readers’ thoughts will be very much appreciated.
Query 19,465 – Passerine.
Bottoms up
VAT on alcohol sold on and after fundraising night
I act for a VAT registered sports club, which is having a fundraising dinner in the clubhouse to raise money for a new lawnmower.
I understand that the ticket sales, advertising income and auction items will be exempt from VAT (the club is non-profit making) but my dilemma relates to the bar sales.
Would all of the bar takings for that night be exempt from VAT as well and how would this affect the input tax claimed on bar purchases?
For example, we would not be sure if, say, a barrel of beer purchased from the brewery was consumed wholly or partly on the night of the dinner, or whether perhaps some of it was, or even none of it. The bar is open every night of the week, so are the takings excluded from the fundraising exemption anyway – as a normal trading activity?
After reading the First-tier Tribunal decision in Royal Opera House Covent Garden Foundation (TC7157) (tinyurl.com/yy7z35xj) which has some parallels to my client’s situation, I would be interested to learn readers’ views on the matter.
Query 19,466 – Boycott.
