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Giving away estate assets before they are received.
My client is 92 and lost his wife earlier in the year.
My client’s estate is worth around £2m at current values, and there is in the region of £3m in the wife’s estate.
My client says he does not need the money from his wife’s estate and would like to give it to his daughters.
Obviously, surviving the gift by seven years could be a bit of a stretch, but there would be a reduction in inheritance tax if he could survive the gift by three or more years.
While he is keen to do this, we are waiting for the solicitors to obtain probate for the wife’s estate, which is delaying the gift of the assets to the daughters.
I am wondering if there is a way of giving away the assets before they are actually received, such as an IOU arrangement so that we can set the clock ticking on the potentially exempt transfers sooner rather than later.
Query 20,051 – Sparrow.
Nudge letters for careless taxpayer.
I have recently been approached by a client who has received a nudge letter from HMRC regarding the let property campaign.
It would appear that small amounts of rental income were first earned in the year ended 5 April 2013: gross income of approximately £5,000, profit of £3,700. Similarly, for the year ended April 2014: gross income of £5,000, net profit of approximately £2,600. For the year ended April 2015 and onwards the profit would appear to be in the order of £5,000 a year.
The client would be a basic rate taxpayer for all years.
The client involved has always worked full-time and has used the rent to pay off the borrowings on buy-to-let mortgages.
My question arises with regard to how many years we need to go back under the let property campaign. There was a failure to notify under self assessment here, although the client involved has advised me that he just didn’t think of it. He has never previously had an agent.
On this basis, is there an argument for supporting going back six years, say for the years 2015-16 and onwards and leaving out the three prior years on the basis that they would not be assessable on the basis that the taxpayer has simply been careless, which I believe may be the case.
Readers’ thoughts would be appreciated.
Query 20,052 – Concerned.
Help! My client is trying to avoid car benefit charge.
My client (who is a 100% shareholder director) has, unfortunately, been speaking to the man down the pub again!
He has been told that there is an easy way to avoid a car benefit charge. The car should be owned 99% by the company and 1% by him as shareholder/director. On that basis – he is told – the benefit-in-kind disappears completely.
I have a very vague memory that, years ago, this idea was being discussed but I cannot remember the details and I am sure that things have changed since then.
Can readers give me any pointers to be able to show to my client that this simply does not work and is only a recipe for problems with HMRC down the line.
Query 20,053 – Sober Man.
What income is included as an ‘output’ on VAT return?
One of my clients is concerned that he has been recording the ‘outputs’ figure wrongly in box 6 of his quarterly VAT returns. I must admit that I am confused by HMRC’s guidance as well.
Here are my three questions:
- He does IT consultancy work for a business in America – my understanding is that he leaves this income off the return because it is not a supply in the UK under the general business-to-business rule. But my client is concerned that this will make his business look less profitable than it is because the related costs of this work are included in box 7 as an input.
- A major deal in the last quarter was to sell a shipment of computers to a business in Norway. The computers went from China to Norway and never entered the UK. I told him that he should not record either the costs or sales for this deal on his return because the goods did not have any UK VAT issues.
- The recent increases in interest rates mean that his cash-rich business is now earning some decent bank interest. Should this be included as income in box 6? My view is that it should, even though it will distort the 20% ratio between box 1 and box 6 because all other income in box 6 is standard rated.
What do readers think about these three scenarios?
Query 20,054 – Computer Carol.
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