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Possibility of mixed-use relief claim.
My client is buying a run down two-bedroom bungalow surrounded by 10 acres of accompanying land with great views. The land has always generated a small income – sheep, geese and latterly horse liveries. It is situated deep in farmland but the station for a fast train to London is only three miles away and this is pushing up the price so SDLT liability is more critical.
Following the result of the Upper Tribunal decision in Suterwalla there is the possibility for a mixed-usage SDLT relief claim.
My client’s solicitor is pushing her to obtain vacant possession for the liveries as she has alternative ideas for the land. She is worried, however, on the impact on the SDLT relief claim?
Can Taxation readers share their thoughts on this scenario?
Query 20,383 – Beach Lover.
Do I need to inform HMRC of ex clients’ death?
Last year, a husband and wife client moved back abroad in tax year 2022-23. They are both Norwegian domiciled and they have moved to a town in Sweden close to the border (to avoid the Norwegian wealth tax – policy makers please note). They are in their late sixties and are semi-retired. They are still partly active in the oil industry.
They were resident in the UK for 20 years and hence deemed domiciled with a five-year inheritance tax run off period. While in this country, they ran consultancy businesses which have now ceased. They have no residual UK assets.
They ceased being clients after I submitted the 2022-23 tax returns. I am still in contact with them on a personal basis.
My question is: if either or both of them die in the five-year inheritance tax period, do I have any responsibility to inform HMRC? It seems to me that HMRC has no other way of knowing of their death unless the Swedish tax authorities tell them. Is this correct?
My own reasoning suggests that I have no responsibility and that it is up to HMRC to police its own rules.
Query 20,384 – Ex Parrot.
Why can’t HMRC get the simple things right?
I have a UK-domiciled husband and wife client who work in Switzerland and let their former home and also the premises from which the husband used to conduct his chiropractor business on a part business part residential basis.
For some mysterious reason the HMRC computer logs the receipt of the tax returns which are submitted online. The tax returns are not processed, however, and so no tax liability is shown. The tax payments which are made on time are shown.
Each year I phone HMRC and it (eventually) fixes the problem for that year but nothing is done to fix it for subsequent years.
As I was expecting, the problem arose again for the 2022-23 tax return when I checked in February, and I wrote to HMRC informing the department of the problem. There seemed to be no point in phoning as I could not afford to waste the time on its ever worsening service levels. In March, over an extended tea break, I phoned and was told that HMRC would not be able to fix the problem before 19 June and that the department would phone me before that date.
As every reader can imagine, HMRC did not phone me and the problem has still not been fixed.
Can any readers, especially those who belong to the aforementioned organisation, give me a clue as to how I can get HMRC to do its job properly? These days, I only ever want to phone HMRC when it has made a mistake, but it is making this ever more difficult. Perhaps we could have a special agent helpline to inform HMRC of its mistakes.
Query 20,385 – Exasperated.
Has disbursement mark-up created a VAT problem?
One of my clients trades as a solicitor and it is quite common for her to pay court fees of, say, £250 on behalf of her clients, passing this charge onto the client as a disbursement. She shows all disbursements as separate lines on her sales invoices, ie separate to fees for her time. She does not charge VAT on any disbursements.
However, in this example, she does not charge the fee at cost but adds on a 10% mark-up to all charges, ie £275 in this case. The entry is noted on the invoice line as ‘court fee including 10% administration charge.’
As I understand it, she has breached one of the conditions of a disbursement per HMRC Notice 700, section 25, ie the payment made to the third party – the court in this example – must exactly equal the amount recovered from her own client.
My question is whether my client must account for output tax on £25 or £275 in this example, which has been happening for six years without being identified as an error. Presumably, the solution in the future is for her to show her administration charge as a separate line on her sales invoice and charge 20% VAT, ie £250 disbursement no VAT, admin charge £25 + VAT?
Query 20,386 – Legal Lee.
Queries and replies
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