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Family business
Tax consequences on LLP that owns property.
A few of our client’s family members (father, mother, two daughters and uncle) pool up their individual properties to form an LLP for carrying on a rental business. Their share of the partnership is based on the market value of the properties transferred (20% each) and this is credited to their capital account and they share the partnership profits on this basis. What would be the capital gains tax consequence on the transfer to the LLP on the basis that they retain the share of interest based on the market value transferred?
The father and uncle have since gifted 5% of their LLP interest to the two daughters after a year. The new share arrangement is now father 15%, mother 20%, uncle 15%, with the two daughters each of 25%. What is the tax consequence of the gift of their LLP’s share by the uncle and the father?
They are now looking to exchange one of the daughter’s main residence property with one of the LLP’s property (as she likes this particular LLP property which is bigger and is going to be vacant soon). The LLP property is worth around £100,000 more than her own property but they are not keen to change their partnership’s share of interest. Is there any taxation issue with this exchange?
I look forward to replies from readers.
Query 19,947 – Anon.
AIM shares
BPR share matching rules and AIM shares.
I have a question for readers which I cannot find an answer, despite several attempts at researching: What are the business property relief (BPR) share matching rules that are applicable to AIM (alternative investment market) shares?
A client has an AIM portfolio and is wondering about how to match disposals when considering whether the two year holding period for BPR is met. She said the client is conscientious and wants to know for record keeping purposes.
I would appreciate any assistance from readers.
Query 19,948 – Researcher.
Pension
Obtaining a 35th qualifying year for NIC purposes.
My client runs a small business through his personal service company. He draws a salary of just over the Class 1 National Insurance contributions (NIC) lower earnings threshold (LEL) thereby obtaining credits towards his state pension which he will qualify for from mid-September 2023.
According to his NI record, and assuming he continues to draw a salary of at least the LEL, then up to and including the 2022-23 tax year he will have 34 years of full contributions. However, 35 years are needed to obtain the full state pension and he will cease to be liable to pay NICs part way through 2023-24.
His contribution record shows that there were a few years (2012-13 was the most recent) when no contributions were made, but for which a voluntary contribution (£800.80 at present rates) could be made by 5 April 2023. This would increase the pension by £2 a week.
Do readers know of any other way to obtain the extra year at a lower cost. Could, say, six months of voluntary contributions be made to supplement the NI record in the year of retirement?
Alternatively, in 2023-24 could he double his salary for the six months before he reaches state pension age. For example, the LEL for 2022-23 is £6,396 so he would pay himself, say, £540 a month. If the thresholds stay the same, could he pay himself £1,080 a month from April to September 2023. He and the company would pay a little Class 1 NIC (presumably covered by the employment allowance) but his pay for that period before NICs are no longer payable would be more than the annual LEL. Would that make 2023-24 a qualifying year or have I completely misunderstood things?
Any advice on these ideas or any other suggestions would be welcome.
Query 19,949 – Nicolas.
New build
Does delay in building new charity building affect VAT?
I act for a local charity, which has received planning permission to build a new centre to help meet the needs of homeless people. The work will qualify for zero-rating as a new building to be used for a relevant charitable purpose (RCP).
However, due to financial constraints, the charity has decided to build part of the building now to make it active as soon as possible but six private computer rooms and extra care facilities will not be completed until 2024 when funds are available. This extra work will cost £500,0000.
My understanding is that the work in 2024 will also be zero-rated because it is part of the planning consent for the overall building. However, a colleague has said that the work will be standard rated because zero-rating only applies up until the new building is first occupied and it will be classed as an extension.
What do readers think?
Query 19,950 – Charity Cath.
