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Could executors claim residence nil-rate band?
A’s main residence was transferred to a discretionary trust. The potential beneficiaries are A’s two elderly children. It was assumed A will not pay IHT on their death as the property is in the trust. This is not the case as it will fall under the gift with reservation of benefit rules as A is still staying in the property without paying market rent.
When calculating IHT on death, can the executors claim the residence nil rate band on A’s residence even though the main residence is owned by the trust?
Query 20,083 – Locust.
Does corporation tax apply to company limited by guarantee?
We have been asked to advise a team of four intrepid individuals who have teamed up to take part in a cross-Atlantic rowing competition. The basic details are:
- Entry fee £16,000 for four people.
- No minimum sponsorship.
- Funds needed are £150,000 – for the boat, equipment, training, food, etc.
- This is not a charitable venture in itself although they will raise funds for charity separately through a JustGiving account. Their main goal is to compete and achieve their goal of rowing across the Atlantic.
- At the end they will sell the boat and the proceeds will either go to charity or back to the sponsor dependent on the agreement made with the sponsor.
For transparency reasons the team are thinking of setting up a company limited by guarantee. The team have asked whether the company will be subject to corporation tax. There is an argument that a trade is not being carried out so corporation tax would not apply but the team are anxious to obtain certainty on this point.
Query 20,084 – Columbus.
What is the correct address to register with HMRC?
One of my clients owns a commercial building in London, which he is going to renovate and rent out to a restaurant. The client wishes to opt to tax the building and register for VAT in order to claim input tax on the cost of refurbishing the site which will cost over £1m.
I have several questions on the administrative issues of registering for VAT and opting to tax:
- My client lives in Africa and owns the property through a company registered in the Cayman Islands (CI). The company’s registered office is a PO Box number at an address on the islands. My client does not want his home address to be registered with HMRC because any correspondence would probably get lost in the post. Given that HMRC will not accept a PO address, can I use my office address on the forms VAT1 and VAT1614A?
- Although the UK title deeds are registered in the name of the CI company, the rental income will belong to a separate company in Switzerland which owns all the shares in the CI company. My client is the sole shareholder of the Swiss company. Should the Swiss company also opt to tax? Rental invoices and purchase invoices will all be received and raised by the CI company because it has the legal interest in the property.
- The CI company does not have a bank account – will this be a problem getting a VAT number? All payments and receipts for the building will be processed through my firm’s client account, with the surplus being passed directly to the Swiss company, or the deficit being paid to my client account by the Swiss company.
Readers’ thoughts on these practical challenges would be appreciated.
Query 20,085 – Confused.
VAT cost of converting an office building.
My client is an incorporated property investor who has just bought an office building and intends to convert it into self-contained living accommodation. He is concerned about the VAT cost of this.
I have suggested that it may be possible to convert the building from its previous use as an office into student apartments with, say, shared kitchens and then make a disposal of the building as a whole to a separate limited company owned by him on the basis of the first grant of a long lease in the building. This may be a zero-rated supply which would facilitate reclaiming the input VAT incurred on converting the building into student apartments.
My question is whether this strategy would work for VAT purposes. In addition, would it make a difference if the building were converted into self-contained apartments as opposed to student accommodation? I have advised the client that the existing company which has purchased the building would need to be registered for the construction industry scheme in view of the nature of the work it is carrying out and there would be stamp duty on a sale of the building to the separate investment company.
Readers’ views would be welcome.
Query 20,086 – Speculator.
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