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Is there a CGT problem on sale of marital property?
My clients (and friends) are Mr and Mrs B. They are in their 70s.
Their only residence is worth £1.5m and has a large gain if sold. Powers of attorney are in place and there are two married adult children.
Sadly, two years ago Mrs B suffered a psychotic episode and was sectioned and is now permanently in hospital care. Fees are paid by the state because of the sectioning so there are no issues in that direction. Mrs B has minor pensions less than the personal allowance. Mr B’s pensions put him in the higher rate bracket.
Mr B wishes to sell the property to give the excess funds to his children. I am assuming that the financial rights of Mrs B under the power of attorney are being respected.
Originally I assumed that there would be no CGT problem as they were still married. However, my reading of the rules indicates that Mrs B’s PPR claim would cease after three years because she was no longer living in the property and they were nominally ‘separated’.
Is there a further exemption in the rules which I have not yet found? If not, can Mr B transfer Mrs B’s 50% share of the property to himself within three years to solve the problem?
Query 20,159 – Sad Accountant.
Is there a requirement to register for Irish PAYE?
In a case I am considering, a Northern Ireland resident haulage company will have drivers who will be crossing into NI/ROI on a daily basis lifting loads in the South before returning to the North.
Others may lift loads in Ireland and will be there overnight to comply with driving hours. Is this considered working in Ireland?
Reading the PAYE manual for Ireland, we consider that our client should be registered for payroll in Ireland.
Can readers address if this is correct and, if so, the accepted method of apportionment between the UK and Ireland?
Query 20,160 – Trucker.
Does giving consent to change share rights cause tax issues?
I have read the HMRC spotlight on use of dividend diversion to pay education fees and am concerned that it might affect some planning I am advising on.
My client company is owned by John (60 shares) and by John’s father, Peter, (40 shares). These shareholdings are of ordinary shares and have been in place for many years.
Peter has proposed that his 40 shares are converted to B ordinary shares and then of ten out of the 40 are converted into preference shares. Those ten will be transferred to Peter’s grandson, Henry, (John’s son) who is 12 years old, and the dividends on them will be used to pay school fees.
The company has a history of paying substantial dividends and there are no plans to increase the total dividends paid each year – the preference shares will take the first slice of dividend but John will continue to receive broadly the same level of dividends as he has in past years. On the face of it, his position is unchanged and he has not diverted income to Henry, so this does not appear to be a settlement. But as John is the majority shareholder his consent will be needed to change the share rights. Does his giving consent turn this into a parental settlement?
Readers’ views will be appreciated.
Query 20,161 – Family Man.
Are calculations correct with capital goods scheme?
One of my clients trades as a financial services business and 80% of their income is VATable as advice and 20% is exempt commission for arranging investments and loans.
Three years ago, the client purchased the freehold of their current trading premises for £247,500 plus VAT and claimed 60% input tax with the standard method for partial exemption purposes. The legal fees were £3,000 plus VAT, so we claimed 60% input tax on these fees and capitalised the fees to the balance sheet as a fixed asset.
Since then, we have carried out capital goods scheme (CGS) adjustments each year because the amount capitalised in the accounts exceeds the threshold of £250,000. And even if this figure was incorrect, the total of £250,500 for costs excluding VAT is also over the threshold.
However, I understand the relevant figure might be £247,500. Is this correct? If so, what happens with the extra input tax we have claimed with two annual adjustments carried out so far ie, because the standard rated income has increased from 60% to 80%?
Finally, my client is thinking of selling the property and moving to bigger premises.
Will they only charge VAT on 60% of the proceeds as this was the percentage of input tax originally claimed? Dare I say it, but the CGS seems to be very complicated.
Query 20,162 – Number Cruncher.
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