Can relief be claimed on investment of sale proceeds?
Our clients are a couple who run a boutique hotel in Gloucestershire with the unique selling point of having only a limited number of rooms, the hotel’s quirky decor, and the fact their menu is fully vegan.
They sold their hotel in 2019. The money from the sale was then re-invested into refurbishing and upgrading their holiday let properties, which were run down after two decades of being rented out. Their letting properties consist of a number of self-catering flats they rent out in Cornwall.
My question is whether the money they reinvested on refurbishing works carried out within the three years after sale would be eligible for relief.
I am not sure what the position would be and I would be grateful for readers’ thoughts.
Query 20,511 – Branston.
Are joint venture shareholdings chargeable assets?
Our query concerns the operation of TCGA 1992, s 165 gift holdover relief in the context of a gift of unquoted trading company shares.
Specifically, our query relates to the application of paragraph 7 of Schedule 7 to TCGA 1992, which provides a restriction in the amount of capital gain that can be heldover, calculated as the fraction the company’s holding of non-business chargeable assets bears to its total chargeable assets.
Our company has three ‘investments’ comprising 50% shareholdings in three unquoted trading companies. Being less than 51% holdings, these investments would, on-the-face-of-it, be non-business chargeable assets for the purpose of determining the paragraph 7 restriction.
However, on further research, it has been established that these three investments are ‘qualifying joint venture’ shareholdings in terms of TCGA 1992, s 165A(7). It is our understanding that the presence of such qualifying shareholdings do not affect the company’s trading status, nor any claim for Business Asset Disposal Relief, should a claim be made on a future disposal of the company’s shares.
The question we are having difficulty resolving, is whether ‘qualifying joint venture shareholdings’ are still regarded as non-business chargeable assets for the purpose of determining the paragraph 7 restriction in the amount of the capital gain that can be heldover?
Readers’ thoughts would be appreciated.
Query 20,512 – Restrictor.
Inheritance tax treatment of insurance policy.
My client is looking to buy a family income benefit (FIB) policy. FIBs provide regular, tax-free income to beneficiaries when the holder passes away or when they are diagnosed with a terminal illness.
Our client does not currently have a partner, so the beneficiaries of the policy would only be his three children.
He has no drawdown or income rights during his lifetime. The policy only becomes activated when one of the two events described above come to pass.
How will this policy be treated for IHT purposes? Will it form part of our client’s estate and if so, will it be valued on the basis of the amounts being paid out, the amounts paid in, or both combined?
I have thought about this long and hard and I’d welcome other practitioners’ thoughts.
Query 20,513 – Planner.
Is 5% or 20% VAT charged on work for new garages?
My client specialises in constructing and repairing garages for dwellings but I am confused by the rules about 5% VAT on building services when a residential conversion takes place.
To give an example, a recent project involved the conversion of a pub into six apartments and my client built six new garages – all linked – on the land that used to be where the pub car park was located. Each garage is recorded on the title deeds as being relevant to a specific flat ie, one garage for each flat, and it is designed to park a vehicle.
My client’s view is that he should only charge 5% VAT on his materials and labour to the developer but when I asked him why he had reached this conclusion he said that it was ‘because Moira in accounts’ at the developer’s office told him it was the correct rate. However, I personally would prefer to be sure that 5% is correct, even though Moira is apparently very clued up about VAT.
As a separate question, if 5% is the correct rate, what other documents should my client receive from the developer in the event of a future HMRC query ie, to prevent an assessment for an extra 15% VAT being issued?
What are readers’ thoughts on these issues?
Query 20,514 – Gary Garage.
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