.png)
.png)
Will deed of variation result in SDLT liability removal?
A widow died leaving her estate worth £725,000, to include her house worth £660,000, to her three adult children (A, B and C) in her will. A wants to keep the house and so buy B and C out and this is all agreed. A will sell her house and move in to the deceased’s house on completion. Obviously, the executors (who are A, B and C) can appropriate one-third of the property to A in line with her beneficial entitlement in the will.
A will, though, have to pay stamp duty land tax (SDLT) on the purchase of two-thirds. However, it has been suggested that they execute a deed of variation (DOV), with inheritance tax and capital gains tax elections, that the will be read and construed as if, instead of the gift of residue, it contained a specific legacy of the property to A subject and charged with the payment of legacies of £220,000 to each of B and C with any residue passing to A, B and C. The thinking is that this will remove any liability to SDLT.
I should mention that we claimed two inheritance nil rate bands of £325,000, as the deceased was the survivor of a married couple, and residence nil rate band (RNRB) of £75,000. However, I do not think the DOV will make any difference to the claim for RNRB as, at the date of death, the deceased owned the property as their residence free of any mortgage.
Will the planning work?
Query 20,311 – Azure.
Tax treatment of UK- resident’s growth shares.
Our client was employed by company A in Hong Kong in 2011. Company A has its headquarters in the UK and has a branch office in Hong Kong.
A offered growth shares in 2012, when our client was non-resident in the UK but resident in Hong Kong.
The growth shares which have not been used are still available, but our client left the company in 2014. Our client is now UK resident. Company A is looking to list in the US stock exchange. Our client has been offered two options by the company:
- To take cash now to redeem the amount of growth shares.
- New shares will be offered once the company is listed in replacement of the old shares with the same conditions attached.
It has been informally advised that option A will be treated as a taxable dividend if our client is UK-resident. However, the detailed basis on which it is treated as dividend income has not been mentioned. Informal advice said nothing about the tax position under the option B.
Any advice that Taxation readers can offer will be appreciated.
Query 20,312 – Expat.
Is there still a VAT advantage to including a booking fee?
I was booking a ticket to a music event recently. As usual these days, the booking was online. However, I was surprised to see that the price included a booking fee of 15%.
Bearing in mind that this is presumably a fully automated system, the charge did seem a little high; that said, I am not a computer expert so perhaps something is going on ‘behind the screen’ that will justify this.
My experience did make me wonder how much might be acceptable as a booking fee charge.
Am I correct in thinking that this element of the ticket cost would not be subject to VAT as being for financial services or credit card handling? If so, I am thinking that some of my clients who operate small music venues should adopt such an approach.
Could a similar element be included in the price of tickets that are paid for ‘on the door’ using a card reader?
What do Taxation readers think?
Query 20,313 – Rocky.
Change from commercial to residential.
I have a client who bought a commercial property in a limited company (HH) to convert into a wedding venue. The purchase price was £200,000 plus VAT and the company claimed input tax because of a link to intended taxable sales, ie wedding fees. My client did not opt to tax the company’s interest in the property with HMRC.
However, the company has failed to get planning permission and the director now wants to demolish the property and build two new luxury homes which he has been told he would get planning for without any problem. He intends to sell one house on the open market and keep one himself. Does this mean the company can only claim 50% input tax on the cost of professional fees and building materials ie because he will live in one property himself (non-business) and only one will be sold (zero-rated sale)? Are there other options?
As a separate possibility, he is also thinking about buying the land from the company in his own name before undertaking the residential development – so the company will pay for the demolition and sell just land – what are the VAT issues here?
Query 20,314 – Barret.
Queries and replies
Send queries and replies to taxation@lexisnexis.co.uk. Replies should be submitted by Monday, 11 days after print publication. We pay £40 for each reply published in the magazine and select those which reflect the widest range of answers. As a result, the views expressed are not necessarily our own and so they should be read with a critical spirit. Contributions may be identified by name or a pseudonym. For full T&Cs visit: tinyurl.com/RFguidelines.
