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Is HMRC entitled to GWRB information?
I am advising the personal representative of a deceased former client. He had made a gift with reservation which falls to be included in his estate. It was made more than seven years ago so is not required to be reported as a failed PET.
I was checking the legal position and was rather surprised to discover that PRs are not required to account for assets that form part of the estate by virtue (alone) of the GWR provisions. This is clearly stated in IHTA 1984, s 216, particularly 216(3) which was inserted by FA 1999. Simon’s Taxes at I11.212 confirms this. Page 5 of form IHT403 does, of course, require information about GWR assets.
I have no problem with advising the PR to include the GWR information. It is not in their interests to engage in a technical argument with HMRC about whether or not there is a legal obligation to supply it. But the point has got me intrigued.
Do readers have any insight into why there is this carve out in s 216 and whether HMRC are entitled to the information under a different route? Has anybody challenged HMRC on this point?
Query 20,015 – Curious Cat.
Foreign Income from Indian mutual funds gains and income.
My client is not domiciled in the UK as a matter of general law but has been in the UK for at least 15 of the last 20 years and is deemed to be UK domiciled for income tax purposes.
He is in receipt of income from a number of Indian sources, including bank interest, dividends and long-term gains from Indian mutual funds. These were received under deduction of tax under the Indian tax deducted at source (TDS) rules and on submission of his tax return a repayment of some of the withholding tax was made.
I am now completing his UK tax return. It is my understanding that the long-term gains from the mutual funds will be classed as being from non-reporting funds. Can readers with experience of these funds confirm this? I assume that these long-term gains will be taxable as income rather than as capital gains, but again I would appreciate any guidance on this point.
Finally, how much of the TDS can be used in a double tax relief claim. Will the TDS actually be withheld or will it be limited to the tax actually paid on each separate item of income?
Query 20,016 – Clarity.
Technicalities of claiming the foreign earnings exemption.
I act for a married couple. They are Thai citizens with visas which allow them the right to stay indefinitely in the UK. They are both US green card holders and are not domiciled in the UK.
In mid 2021-22, during the pandemic, they moved to the UK from the US. The wife continued to work for her existing US employer: although the role was based in Taiwan she continued to work remotely from the UK (Taiwan had shut down). Her husband had a job based in Switzerland and, when possible, travelled back and forth weekly between the UK and Switzerland but during much of the pandemic worked remotely from home in the UK. Both of them had sufficient presence in the UK to make them resident under the statutory residence test and they can’t rely on the exceptional circumstances exemption for Covid-19 as both chose not to be repatriated to the US and chose to live in the UK.
Both of them have relatively low incomes and will fall within the basic rate band for 2202-22 even if they are taxed on the arising basis. Both are treaty resident in the US and can make a US claim for double tax relief, although they may not need to do so if they claim foreign-earned income exclusion in the US in respect of Taiwan and Swiss employments. They are taking local advice on this point.
I am not engaged to deal with their employers. I believe that a compliance obligation exists for US, Taiwanese and Swiss employers with employees working in the UK, but no direct collection was put in place in 2021-22. So employers will have PAYE non-compliance issues for 2021-22.
My question is this: if they arrange a direct collection for PAYE for 2022-23, can they claim a foreign earnings exemption under ITA 2007, ss 828A-828D (RDRM32070) for the current year, for relevant foreign income from work actually performed abroad in 2022-23 (which is less than £10,000)? What would the mechanics of this be? Could the exclusion apply from the start of 2022-23 if direct collection is not put in place until mid 2022-23? I’ve never attempted to claim the exemption before so any advice on practicalities would be welcome.
Query 20,017 – Pillbury.
Grant of option fee on land – exempt or standard rated?
One of my clients (A) has the opportunity to earn big profits on a lucrative land deal:
The land is currently owned by a farmer – there are no buildings on it.
The farmer was paid £350,000 by company A two years ago, giving A the right to purchase the land at any time in the next five years for £3m.
Company A has granted the option to my client for £500,000, meaning that my client can buy the land for £3m and sell at a profit.
There are no options to tax elections in place on the land for any party.
My understanding was that the £500,000 fee charged to my client by company A would be exempt from VAT but A’s advisers have said that it is not a land supply because A has no direct interest in the land, only the option. As £100,000 VAT would be blocked for input tax purposes because of partial exemption, my client is naturally keen to avoid VAT being charged incorrectly. What do readers think?
Query 20,018 – Giles.
