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Can transitional profits be spread?
I have met a prospective client recently. He was a partner in a law firm until 30 April 2023, earning £250,000 a year and had overlap relief of £70,000. He joined his new firm on 1 May 2023 and earned £330,000 in profits in the first year.
Is there any scope to use the option to spread transitional profits under the change of basis period rules here?
Query 20,375 – Curious.
Does married couple owe additional SDLT?
A friend of a friend has asked me if I can help her with a stamp duty land tax issue. I have been searching the HMRC guidance, and looking for the SDLT legislation, but I am not familiar with the complexities of SDLT and I am struggling to find a conclusive answer.
S bought her own property many years ago as her primary private residence. She then met her now husband (W), and moved in to his property, which he already owned and was already living in. S has rented out her own property since she moved in with W. Since moving in together, they have got married. S and W are now buying a new property together, which they will live in. W is selling his previous property (which they currently live in), but S is not selling her previous property – she will continue to rent it out.
Does the additional 3% rate of SDLT apply to the purchase of the new property, by virtue of the fact that S will still own her first property? W will replace his old main residence with the new one, but S will still own two properties. S and W’s solicitor has said that he cannot advise on the SDLT position, and that they should take advice from an SDLT specialist. The relatively low value of the property means that this option is not cost effective. S has an ‘unofficial’ opinion from a different solicitor, who says that the additional rate is not payable, but he is not prepared to give that opinion in writing, or for it to be relied upon. S has completed the online HMRC SDLT calculator, which gives the answer that the additional rate is not payable. However, I have also run through the calculator and I do not think that the questions that it asks collect sufficient information for this scenario.
It is my understanding that, as S will own two properties, and S and W are married, the additional rate applies to the new purchase, regardless of the fact that W will only own one property. However, I have not been able to find the legislation to back this up.
Time is of the essence as completion of the purchase is imminent. Is anyone able to help us, please?
Query 20,376 – Rushed.
What is a ‘group’?
For argument’s sake, let’s imagine a group of 20 friends. None of these friends are personally connected with one another in any way. Jointly, ten of the friends own all the shares in A Ltd and the other ten own all the shares in B Ltd. Are A Ltd and B Ltd connected per CTA 2010, s 1122(2)(d)?
To be clear, I am very aware that the answer must be no. If the answer were to be yes, every company would be connected to literally every other company. However, CTA 2010, s 1122(2)(d) states:
‘(2) A company is connected with another company if –
(d) a group of two or more persons has control of both companies, and the groups either consist of the same persons or could be so regarded if (in one or more cases) a member of either group were replaced by a person with whom the member is connected.’
We have a group of 20 persons who have control of both companies. So, taking as a given CTA 2010, s 1122(2)(d) does not apply, my question is why doesn’t it apply?
Some of my immediate thoughts were, ‘the group has to be connected or acting in concert to count’. That would be sensible, but the legislation doesn’t say that.
Another thought was ‘we don’t have “a group” we have “two groups” and those two groups do not comprise the same people’. This is probably the best I can manage. But it’s unsatisfactory. Yes, there are two groups of ten. And there is one group of 20. Where in the legislation does it say we can ignore the group of 20 because there are two groups of ten? And what does ‘group’ even mean in this context, given there is no definition?
Query 20,377 – Autostereogramy.
Does termination fee create VAT registration problem?
One of my cleaning contractor clients has an unusual VAT question. The business is not registered for VAT because it only has two annual contracts – one for £20,000 and the other is for £60,000 – less than the registration threshold of £90,000.
It has recently lost its biggest contract because the business customer has relocated to a different part of the UK; the customer has agreed to pay £100,000 to my client to terminate the contract early; it was a rolling three-year agreement.
The question I have is whether the receipt of the £100,000 payment means that my client must register for VAT under the forward-looking test, ie treat the receipt as standard rated. I have received conflicting advice: one colleague said that it is non-VATable because the cleaning supplies were not subject to VAT but another colleague said that it relates to work that would be VATable if my client had been registered, so it is a taxable receipt. What do readers think? Query 20,378 – The Terminator.
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