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Tax consequences of setting up an LLP.
We are getting a number of enquiries from prospective landlords about setting up limited liability partnerships (LLPs).
The advice seems to be coming from ‘property clubs’, so I am not sure how much tax knowledge goes into the advice.
From my perspective, the limited liability aside, a traditional partnership behaves pretty much in the same way as an LLP and I cannot think of any particular tax advantage to going down the LLP route.
I appreciate that each situation will have its own merits, but is there something I am missing in general?
Query 20,347– Apples and Pears.
Does deed create a contract for sale of shares?
My clients have had a new shareholder agreement drawn up and, conscious of the need to protect business property relief, I have looked for ‘put and call options’.
The agreement includes a clause referring to a compulsory transfer which deems that immediately before death the shareholder has issued a notice to the company that they propose to transfer their shares and the company then has 20 days to notify the estate that it wishes to buy the shares.
The deed specifies that the company is not obliged to purchase the shares. I do not believe that the deed, as drafted, creates a contract for sale since the company is not obliged to accept the transfer of shares, but this is not how I have seen the protection of surviving shareholders drafted in the past, so I would appreciate confirmation that it works.
Query 20,348 – Captain Jack.
Tax implications of an author’s income and expenses.
I have a client who is retired and has income from state and private pensions.
She recently told me that during the Covid lockdown she started to write a book based on her personal experiences which she believes will be of interest to others.
As I understand things, the book is approaching completion and may be published towards the end of the current tax year or perhaps early in the next one.
Her main ‘expense’ so far is the considerable amount of her own time that she has invested into the writing process. However, she has also incurred actual monetary costs in printing draft copies. She has also paid an editor as well as a proofreader for their assistance.
I am wondering how I should deal with this for tax purposes. Could I say that, with the possibility of publication now being more of a reality, what may have started as a hobby has morphed into a business?
Could I claim the expenses incurred in 2023-24 as relating to a writing and publishing business and set these against the pension income? Is this possible, bearing in mind that no income is likely until perhaps 2025-26? My concern about doing this is what happens if, heavens forbid, the book does not sell as well as my client hopes and the annual income is less than £1,000.
If that were to be the case, are we then stuck with declaring the income (less any ongoing costs, of course) without the possibility of ignoring this as being less than the £1,000 trading allowance?
I should be grateful for readers’ thoughts here. Query 20,349– Virginia.
Does overseas storage supplier need to register for VAT?
I act for a French-based business that offers a comprehensive storage facility for businesses of all sizes – there are no B2C sales.
The client has recently taken out a long lease on a warehouse in Manchester, which will be operated by two subcontractors, and it is their first entry into the UK market.
My understanding is that my client should register for UK VAT because of the zero-registration threshold for an overseas business and charge UK VAT on all storage fees.
However, one of my colleagues said that the client is a business with its main establishment in France and all of its UK customers will be VAT registered here, so they will pay the VAT with the reverse charge on their own return; my client doesn’t need to register.
This outcome sounds much simpler than registering for VAT but how will my client claim VAT on their expenses?
Also, what happens if they provide storage to a business that is not registered for VAT and cannot do the reverse charge, eg a sole trader trading below the £90,000 registration threshold?
Would the best solution be for my client to directly employ the two staff at the warehouse, which would then give a fixed UK establishment, I guess, meaning they could register for UK VAT and claim input tax?
I’d be interested to know what Taxation readers think. Query 20,350– Storage Sally.
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