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R&D dilemma
Claiming R&D tax credits for Covid-related works.
My client operates in the construction industry. He got in touch with me last week to say that he had seen on a website that research and development tax credits are available for work on making existing buildings Covid safe.
In particular, he had seen that credits were available for converting office space into bike storage areas or for creating additional Covid secure meeting spaces in offices.
I feel uncomfortable with this because it does not seem to be anything more than doing normal construction work, but I am not a specialist in this area and it may be that this sort of activity will qualify. I do appreciate that research and development is available for more than pure scientific research and clearly I would like my client to obtain any reliefs which are legitimately open to him.
I know from recent articles in the magazine that there are some concerns about the way that the research and development market is operating, but I do not want to put a dampener on my client’s expectations unless I have to, because he is now convinced that he is entitled to relief.
Do readers have any suggestions for how best to handle this situation? How do I get myself comfortable that relief is due? Alternatively, how do I convince my client that things may not be quite so straightforward as he seems to think they are?
Query 19,695 – Cyclist.
SIPP
Tax status of personal pension for dual citizen.
I am a dual UK/Australian citizen who has moved back to the UK for a few years and I am currently a UK tax resident. I am 55 and retired and will drawdown 25% tax free from my self-invested personal pension (SIPP) which I have just transferred from a defined benefit scheme.
I have two questions:
- will I be liable to tax on this when I move back to Australia; and
- do I have to declare it to the Australian Taxation Office this tax year?
I look forward to hearing from readers.
Query 19,696 – Dualist.
Property gains
Residential property gains on covenant variations.
We act for the trustees of a landed estate and a question has arisen over the application of the ‘residential’ rate of capital gains tax to capital sums received from the variation of restrictive covenants over land previously sold for development.
The trustees sold some farmland for housing development many years ago and retained the neighbouring land, being part of the main estate. The retained land includes not only farmland but several residential rental properties and the estate owner’s home.
The retained land and properties benefit from a restrictive covenant imposed over the land that was sold, and this limits the amount of development that can take place on the land sold.
The farmland that was sold has since been developed as residential housing and sold off to a series of homeowners and property investors.
Recently, some of the property owners have negotiated with the trustees to vary the restrictive covenants that were originally imposed to allow for further development to their properties, being mainly extensions to the existing houses and some infill properties, and they have consequently paid a capital sum to the trustees to vary the covenant.
This has led us to question whether the covenant variation gains are ‘residential property’ gains or whether an apportionment is required since almost all of the gain relates to the agricultural land and is therefore not a residential property gain.
We would be grateful for any readers’ comments on what seems to be a very complicated matter for relatively small amounts of gain involved.
Query 19,697 – Perplexed.
TOGC
VAT on transfer of a business as a going concern.
I act for a German company that has purchased the stock, staff and customer ledger of a UK business – in other words a transfer of a business as a going concern (TOGC). All of the stock is held in the UK and sold to UK customers.
My client was charged £50,000 plus VAT for the deal and now wants me to register the company for VAT in the UK to claim input tax on this amount. I will ask for the registration to take effect from the day he took over the business.
However, I wonder whether my client should have been charged this VAT? The seller said that VAT had to be charged because there was no VAT number in place for my client at the time of the deal.
But, as I understand it, my client was liable to register from day one because he is not entitled to the £85,000 trading threshold as an overseas business – in other words, a zero VAT threshold. Being liable to be registered for VAT still ticks the TOGC box. The annual turnover taken over by my client from the seller is about £60,000.
My client will continue to operate the business from Germany – the UK presence is a rented warehouse holding all the stock and two employees deal with everything.
Readers’ thoughts would be appreciated.
Query 19,698 – Angela.
