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Does a benefit-in-kind charge arise on the use of a horse.
My client owns and runs a livery stable. The business operates from some fields on which she has built stables and an office. She receives income from clients who stable their horses there with additional income from some owners for feeding and looking after the horses as well as providing riding lessons.
The client has horses of her own which she keeps at the stables. She employs as an assistant on a part-time basis a woman who lives a couple of miles away. Once the assistant’s employment duties have been finished for the day, my client allows her to ride one of her horses for an hour or so.
The assistant has a small paddock adjoining her house and has recently been riding the horse home, keeping it there overnight and riding it back to the stables the next morning.
If this was a company car or motorcycle a benefit in kind would arise in respect of the employee’s private use, but what is the case here?
I seem to recall that many years ago an employee could claim a deduction for the use of a horse in carrying out the duties of their employment. Should the benefit of the use of the horse be declared and, if so, how is the value of that benefit calculated? Do we base this on the cost of the horse and what about the expenses of stabling, food, vet fees and the like?
I hope that readers can advise or is this something that can be ignored?
Query 20,475 – Zorro.
Transferring shares from subsidiary to holding company.
My client consists of a small group of companies with the following structure:
- Holdco, with three natural persons as shareholders.
- One Subsidiary A, 95% owned by Holdco with the other 5% owned by a full-time working director.
- Below Subsidiary A, Subsidiary B is 100% owned by Subsidiary B.
The companies form a trading group and there are no investment activities or investment properties within the group.
It is the desire to move the group from this vertical group structure to one where the holding company runs directly both subsidiary A and subsidiary B.
I have considered doing this by the following mechanism: subsidiary A transfers the shares owned in subsidiary B to Holdco for nil consideration as part of an internal restructuring within the corporate group. This would basically be executed with a written contract and completion of a share transfer form, J30.
This strikes me as being a relatively simple way of achieving the result, but I wonder if readers can offer any comment as to whether this is practicable.
Query 20,476 – Merriman.
How to deal with overage rights on a post-death sale.
I am dealing with the estate of a wealthy individual who owned a significant parcel of land. The personal representatives are negotiating for the sale of the land and are contemplating entering into a contract under which they retain the overage rights in the event of a future increase in the value of the land due to development rights being obtained.
The issue which concerns me is the valuation of the land. Do I need to account for the value of the overage rights in determining the value of the estate and if so what it the basis of valuation – will the personal representatives have to undertake a Marren v Ingles type valuation?
There is a possibility that the PRs could make a claim for IHT loss relief, depending on the value of the overage rights. It could be many years (if at all) before it is known whether development rights will be obtained – by that time the estate will have been distributed to beneficiaries and all IHT accounted for. Or do things remain in limbo until is it known whether an overage payment will be received. This must be a fairly common situation but so far I have been unable to find a clear answer to the question.
Can readers offer me any guidance?
Query 20,477 – Burnfield.
Is there VAT on garage rent?
I act for a client who owns some property in a partnership. The partnership is VAT registered and the property is opted to tax so they charge VAT on the rent in the normal way.
They also own a separate parcel of land with some lockup garages, which are rented to individuals and businesses; the garages are not tied to any residential property. The users are allowed to use the garages for any legal purpose but are mainly used for storage or parking vehicles.
My client has not declared VAT on the garage income because they have never opted to tax this plot of land but I think this is incorrect. If so, should my client issue a VAT only invoice retrospectively to the garage renters? The total VAT will be less than £10,000 for the three-year period since the garages were first rented out ie, when my client purchased this plot of land, so the VAT can presumably be declared on their next VAT return rather than being separately disclosed to HMRC?
My client’s longer-term plan is to knock the garages down and let the open land to one tenant. Can my client reclaim input tax on the demolition of the garages on the basis that output tax will have been declared on the rental income. Or would the partnership need to opt to tax the land and charge VAT to the future tenant? It would be better if an election was not necessary in case the land is sold in the future.
Query 20,478 – Garage Gabby.
Queries and replies
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