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Concern about structure of proposed new scheme.
I am currently working with a consultant in designing a company car scheme for my corporate client.
The client wants to structure the scheme so that employees are able to choose from a list of cars according to their level of seniority but they want to give employees the option, if they want a higher specification car, to pay a monthly supplement.
The consultant has explained to me that if the payment is described as a payment for private use it can be as a deduction against the benefit in kind on the car, whereas, if it is a payment for having a better car, it is not deductible. He tells me that this is the way everybody structures this type of arrangements.
Is he right about this? I’m not comfortable with describing the supplement in this way as manifestly it is not actually a payment for private use.
Am I being over cautious, or I am opening up the company and its employees to problems down the line?
Query 20,319 – Motorist.
Too late to appeal assessments which may be invalid?
I have been reading the recent First-tier Tribunal Brown case (TC9114) with interest as I have a couple of clients in the same position.
The case was about the high-income child benefit charge (HICBC), and the tribunal ruled that the discovery assessments HMRC had raised were invalid because they were raised in the name of the HICBC team and not an individual officer.
My clients were assessed in exactly the same way as Mr Brown. I didn’t advise my clients to appeal at the time because I didn’t think that there was any possibility of success.
My question is: do I have a potential professional indemnity problem in this scenario and, regardless of that, should I advise my clients to make a late appeal?
I assume that HMRC would not accept such an appeal but is it possible that a tribunal might admit it on the basis that it was only the Brown case which opened up the possibility of challenge.
Query 20,320 – Child Minder.
Conundrum when advising both parties who are divorcing.
I act for a profitable company owned 50:50 by husband and wife. I also act for the two individuals.
They have told me that they are going to divorce and that the husband will buy out the wife’s shares at open market value. It may be that this will be structured as a purchase of own shares, as there are sufficient reserves in the company to allow this.
At the moment the divorce is proceeding fairly amicably and husband and wife are both content to instruct me to produce a valuation of the shares. I worry, however, that once I have produced a valuation, things could become nasty – I can imagine the husband turning round and saying that my valuation is too high and, equally, I can imagine the wife arguing the opposite.
I’m sure that other readers have faced the same problem. What course of action do they recommend? If I advise the wife to obtain separate advice, might that be seen as me favouring the husband, even though both of them have been long-standing clients of mine?
Query 20,321 – Solomon.
Does death of joint property owner cause a VAT problem?
One of my clients owns a commercial property which is in four names as a quasi-partnership and is rented out to tenants.
The partnership is VAT-registered and there is an option to tax election in place with HMRC. One of the owners recently died and his son now owns his share; I am comfortable that a new VAT2 and VAT68 is needed; is that correct?
In the agreement, there is a clause that says that, if one owner wants out, he has to offer his share to the existing co-owners. I assume this clause has no VAT issues?
However, if the co-owners do not want the extra share, the departing owner can sell his share to a third party. How would this sale be treated for VAT purposes? Is it a sale by the partnership, ie plus VAT, albeit all proceeds are attributable to one person?
Alternatively, is it a sale by an individual of a quarter share ie, not subject to VAT? As a third option, is it simply a transfer of going concern and we can forget about VAT?
On a further point, the option to tax election was made more than 20 years ago. The partnership could disapply the option but would then not have any taxable supplies. If it deregistered after disapplying, does it still have to account for 20% VAT on the market value of the property price on the final return?
I look forward to Taxation readers’ thoughts.
Query 20,322 – Property Pam.
Queries and replies
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