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Capital gains tax liability in Portugal.
I would be grateful for readers’ advice on the treatment of foreign tax paid on the sale of property.
Due to the way capital gains are calculated in Portugal, where the cost of an asset disposed of is depreciated, my client has a CGT liability in Portugal.
When calculating the gain in the UK, the disposal shows a loss.
Foreign tax credit relief of tax paid in Portugal is not available as there is no UK liability.
I would like to avoid losing relief for the Portuguese tax paid. I have done some research and it seems, as an alternative to foreign tax credit relief it may be possible to claim a deduction relief against the sale proceeds for tax paid in Portugal. As a deduction, this will increase the capital loss carried forward.
Does this sound correct to readers?
Query 20,263– Porto.
Valuing non-voting shares in family-owned company.
Readers’ views would be appreciated on the approach to valuing non-voting shares in the context of a family-owned property investment company.
We have come across a situation recently where parents own 20% of the issued share capital of a property investment company, and a trust for their three adult children owns the remaining 80%.
The parents have other business interests and have concluded that it would make sense for the remaining 20% that they own in this company to be gifted to the children outright, particularly as the parents have realised some capital losses which could be offset against the resulting capital gains.
We were initially comfortable about the approach we were going to take to valuing the parents’ 20% shareholding, being a minority interest, however on reviewing the articles of association, it has come to our attention that the trust’s 80% shareholding is a separate class of shares identical to the parents’ shareholding in all respects, except that the trust’s shareholding is non-voting.
Given the 80% has been held within a trust we are puzzled as to why whoever set up the arrangement felt it necessary for the trust’s shares to be non-voting, given there would appear to have been adequate protections provided by virtue of the shares being held within a trust.
Be that as it may, for the avoidance of doubt we have been advised that there haven’t been any situations since the shares were transferred into the trust where it was considered the shares needed to be non-voting – it seems like a slightly unnecessary ‘belt and braces’ approach taken at the time, which is now potentially causing a valuation complication.
Our dilemma is, therefore, the extent to which any value has been skewed into the parents’ 20% shareholding, making them more valuable than they might otherwise have been, had all the shares had equal voting rights.
What do readers think?
Query 20,264 – Puzzled.
Should I use white space for routine estimates?
The recent employment law case of Stuart Harris Associates Limited v A Goburdhun (tinyurl.com/GOBURDHUN) has raised some questions in my mind about the use of estimates.
Typically with my smaller sole trader clients I have used estimates for such things as goods taken for own use, business proportions of motoring expenses and use of home as office. Sometimes I have also used estimates to fill in gaps where, for example, the client may only have retained ten out of 12 months’ worth of phone bills.
I’ve always been conservative in these estimates and I don’t believe that HMRC would have a problem with any of them if, though it never seems to happen these days, there were to be investigations.
It has never been my practice to include a white space disclosure on a client’s return for such routine matters, although I would do so where there was a material one-off estimate.
Reviewing the HMRC guidance at SAM121190 makes me wonder if I should white space each and every time I have used such a routine estimate. What do other advisers do? I would have thought almost all small trader returns will include some element of estimation. Surely HMRC does not want white space disclosures for all of them.
Query 20,265 – Accurate.
Is there VAT on sale of website domain?
I am selling a website domain name I purchased in 2020 as a business asset, to an interested party via a domain trading platform. The trading platform will act as an intermediary and earn 25% commission from the deal – they take the payment from the buyer, and when the transfer of ownership is confirmed they release the funds to me, less their 25% cut.
I do not, and will not know the location or tax status of the end buyer, but the trading platform is based in the Netherlands and has both a Dutch VAT number and company registration.
The platform gives me the option to calculate VAT based on the country of the seller or buyer – I imagine they give this option as I can buy or sell on the platform, but in this case I’m a seller. All my dealings with the buyer are via the trading platform.
What is the VAT position here? Do I need to consider registering for the mini one-stop shop scheme?
Query 20,266 – Dominic.
Queries and replies
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