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Implications of reversed pre-Budget pension withdrawals.
Before the 30 October 2024 Budget, rumours were swirling around regarding various aspects of the tax implications of pensions. As in the past few years, there were suggestions that the tax relief for premiums paid by higher-rate taxpayers might be restricted. This then seemed to be superseded by comments that the tax-free lump sums that could be withdrawn would be reduced from £268,275 to £100,000. This resulted in people (including some of my clients) withdrawing tax-free cash from their personal pensions. In the event, of course, these rumours came to nothing and no change was made to the lump sum allowance. However, I now read that some pension funds appear to have allowed their clients to repay these sums back into the pension within a ‘cooling-off’ period of a few weeks.
I now understand that HMRC does not agree that such repayments can be made. Is this correct, or do the pension fund conditions override this? If HMRC is correct, and in anticipation of enquiries from my clients on this matter, can readers advise on the implications of such withdrawals and repayments?
Query 20,459 – Adviser.
What is the best way to structure sale of retail business?
The partners in a retail jewellery business want to split up. The value of the stock of gold in the accounts at cost is considerably below market value.
The stock will be divided three ways, and the partnership dissolved. One partner will use the gold in his existing wholesale business run in partnership with his wife. The other will use it in his new sole trader business, and the third partner will keep it as an investment.
Is there any way for the gain on the stock of gold to be held over when it is transferred on dissolution of the partnership? Readers’ comments would be appreciated on this and any other way to structure this.
Query 20,460 – Goldie.
Unclear guidance on tax treatment of grants.
My client (C) purchased a smallholding and land, to create a farm. He has been awarded grants from the Woodland Trust (WT) and the sustainable farming incentive scheme (SFI). I am struggling to find anything conclusive about the tax treatment of the grants. The published information on both schemes does not address their tax implications, and the bodies awarding the grants are unable to provide any further guidance.
C operates as a VAT registered general partnership with his wife, which also includes a separate trading business run from the farm which makes standard rated supplies. The farm does not make any supplies at the moment, as its only income is from grants. Under the WT scheme, two payments are received. The first covers the cost and supply of fencing and trees, and the second is to cover the associated cost of labour. My client is required to send an invoice to WT for the amount of the payment due. The information provided by the scheme states the grants are ‘inclusive of irrecoverable VAT where applicable’. My client incurred input VAT on the purchase of the fencing and trees, but he installed the fencing and planted the trees himself. Under the SFI, my client receives a payment every three months for managing the land in a particular way.
VATSC06311 says that where a payment is not consideration for a supply, it is outside the scope of VAT. It seems to me that both types of grant would be outside the scope of VAT. Do readers agree? If this is the case, what is the impact on any input VAT suffered?
BIM40451 says that grants which meet revenue expenditure are taxable, but those that meet capital expenditure are not. We have a one line email from WT which says that the payments are not taxable. I believe that installing fencing and creating woodland is capital expenditure, and so the payments from WT would not be subject to income tax?
If the payments are not taxable, presumably any costs incurred in installing the fencing and creating the woodland are not allowable as a revenue expense? The SFI has not given us any information on whether the payments from their scheme are taxable.
Readers’ help would be appreciated.
Query 20,461 – Orchid.
Will container business need to register for Irish VAT?
One of my clients trades in containers, either leasing them out on a long-term basis to business customers throughout the UK; renting them out to businesses on a short term basis; in some cases, they buy and sell containers.
The directors are keen to expand the business into Ireland and have been advised that if they just rent out or lease the containers to Irish businesses, they will not need to register for Irish VAT but they must register if they buy and sell them there. This seems a bit strange, surely there will be Irish VAT payable for any supplies made in Ireland? And how will my client claim VAT on the purchase of the containers, which will be subject to Irish VAT when they are purchased from suppliers based there or imported from the UK?
As a separate question, if my client does get an Irish VAT number, will they charge Irish VAT on all income generated in Ireland, ie rental and lease supplies, as well as the sales of containers? My client will not have any office, warehouse or other permanent establishment in Ireland, only in the UK. What do readers think?
Query 20,462 – Danny Boy.
Queries and replies
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