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Covid residence
Resident in UK but running overseas business remotely.
Some years ago, my clients, a married couple (one Singaporean, one British) moved to Singapore, where they set up a business and have lived ever since, whereupon I had ceased to act for them.
They have recently contacted me for advice. They bought a second home in the UK in March 2018 and visited it for fewer than 90 days a year in 2018-19 and 2019-20, while carrying on their business and maintaining a main residence in Singapore.
Because of various Covid-related difficulties, they returned to the UK in June 2020 and have been living in the UK house since then, running the business remotely. It is unlikely that either of them will go back to Singapore before 183 days have expired.
They have put their two teenage children into boarding school here, but their intention is to carry on living in Singapore once life there is less restricted, and to make visits to see family in the UK of fewer than 90 days each year over the next few years.
I am sure that they will be UK resident in 2020-21, but they will have no UK income. My main concern is whether they have a responsibility to report to HMRC regardless of whether they have a tax liability here.
I would also be grateful for any advice from readers on this situation, where it seems that substantial ties with the UK have been re-established.
Query 19,627 – Big Blue.
Out of key?
VAT and mixed supplies on room hire.
One of our hotel clients is concerned that they have been dealing with VAT incorrectly on conference room hire charges after reading about the recent tribunal case Europcar Group UK Ltd (TC7733) which concerned children’s car seats being an optional extra when hiring a car and therefore subject to a separate VAT charge.
The hotel has a very nice grand piano and some hirers have a musical interest and need to use the piano. My client therefore advertises two room rates for hirers: £45 an hour without piano or £60 an hour with piano. The client has always treated both prices as exempt from VAT – there is no option to tax in place on the property. In other words, the supply is still for room hire, but with a piece of extra furniture (the piano) needed in some cases.
To add a twist, if a hirer wants to use the hotel’s projector and screen for a presentation, a charge of £60 plus VAT is made for each hiring. This VAT charge appears to be inconsistent with the exemption for the piano arrangement.
Taxation readers’ thoughts would be appreciated as to whether the client has been dealing with VAT correctly.
Query 19,628 – Liberace.
Suspicious support
Professional action if CJRS payments were not due.
One of my clients (the sole director and shareholder of his ‘one-man’ company) asked me to furlough him since 17 March. I have recently discovered that he has, in fact, been working since that time.
I intend to write to him and request that he refund to HMRC the payments that the business has received under the coronavirus job retention scheme (CJRS). I will advise him that if he does not do this and HMRC finds out, there will be 100% penalties to pay.
If he ignores this advice, where do I stand ethically? Should I resign? Should I report him for money laundering purposes? If I do nothing and HMRC finds out, would I also be culpable because I knew that this was going on?
Is there anything I can do to cover myself? I wonder whether he will be the only client in this position. I want to advise my client, but do not want my professional reputation to be damaged.
Query 19,629 – Worried.
Conditional sale
Tax treatment of a gain on conditional sale of property.
We act on behalf of a sole trader client who has agreed to sell part of the land used in his business. He received a 10% non-refundable deposit in August 2020 amounting to £200,000 with the balance payable in 18 months’ time, as long as the buyer obtains planning permission to develop the land. If this permission is not received, the sale would not be completed. That said, I assume that the buyer must be confident of obtaining permission in view of the amount of the deposit paid. The land cost £150,000 about 35 years ago, so there is a substantial capital gain.
Our queries are as follows.
- The £200,000 would presumably be a gain in 2020-21. When would the balance be taxable, in view of the contingent nature of the sale?
- If the gain on the whole proceeds is taxable in 2020-21 is there any way that the tax due by 31 January 2022 could be deferred because the balance would not be received until February 2022. This assumes that planning permission is received and the sale is completed.
- The land has never been used for residential purposes, but if the buyer obtains planning permission for (say) houses or flats, would our client have to make capital gains tax returns and pay tax due within 30 days under regulations relating to gains on residential property?
Advice from Taxation readers would be much appreciated.
Query 19,630 – Landowner.
