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Does flat rate scheme apply to mobile phone business?
I have a potential client who has a business selling mobile phones to consumers. He is registered for the flat rate scheme. The sale of mobile phones to him is treated as subject to the domestic reverse charge.
He thinks he falls through a ‘loophole’ whereby he can benefit from the FRS and apply the 7.5% retail rate to his turnover but he also doesn’t incur any irrecoverable input tax. It feels too good to be true but I can’t see where he’s wrong.
I don’t think the sales are excluded from flat rate turnover because his supplies are to private consumers and are not subject to the domestic reverse charge (SI 1995/2518, reg 55C(6)).
I think his purchases fall outside the flat rate scheme because the wholesale supply to him is subject to the domestic reverse charge but the output and input tax should net off to zero (SI 1995/2518, reg 55C(6)).
I don’t think he’s a limited cost trader because the mobile phones purchased are ‘relevant goods’ (SI1995/2518, reg 55A).
Can readers tell me if I am missing something crucial? Query 20,271– Mobile Man.
SDLT on freehold property owned by partnerships.
My query concerns the SDLT consequences associated with the merger of two GP partnerships.
In summary, each partnership owns a freehold property (both properties are recognised in the respective partnership accounts), with mortgages attached, which are held by each equity partner in accordance with their profit sharing ratios.
Due to the net equity (ie market value less mortgage) being larger in Partnership 1, the partners of Partnership 2 are being asked to contribute the difference to the partners of Partnership 1.
This transaction will undoubtedly fall within FA 2003, Part 3, Sch 15, however, it is not clear whether a charge to SDLT will arise.
In particular, para 10 imposes a charge when land is transferred to a partnership, however, my view is that there is no such transfer of land taking place – SDLTM33130 suggests there will be continuity of a partnership, albeit this is not clear.
Para 14 only applies to property investment partnerships, hence my tentative conclusion that no SDLT charge arises.
Any assistance from readers would be very welcome.
Query 20,272 –Optimist.
Are all private pensions exempt for inheritance tax?
My understanding is that following George Osborne’s pension reforms private pensions are now exempt from inheritance tax.
However, in discussions with a local, well respected IFA accountant, a number of issues were raised that have cast doubt on my understanding.
I am seeking clarification on the following points:
- that for any pensions before 2000 and not written in trust the inheritance tax exemption would not apply; and
- that for some policies pension companies will only pay out to beneficiaries the contributions made into the pension and not include any increase due to investment appreciation/compounding.
I would be interested in readers’ views on the above.
Query 20,273 – Toad.
Which work on cottage will be subject to 5% VAT?
One of my clients has purchased a holiday cottage in Devon and, by sheer fluke which was caused by delays by the vendor’s solicitors for reasons that are not entirely clear, completion did not take place until two years and three days after the previous occupant died.
However, a colleague of mine says this is potentially good news since the repairs that need to be carried out can be made at the reduced rate of 5% under the two-year empty building rule. Would I be correct in this assumption? My client has not moved in yet.
My careful reading of notice 708 tells me that work started before my client moves in can be charged at the rate of 5% VAT but I understand there is an opportunity for builders to also charge 5% VAT in some cases after they have moved in. Again, is a correct interpretation?
Finally, could readers assist on what kind of evidence that needs to be provided about the two-year period when it remained unoccupied? Would for example the death certificate of the previous owner be adequate for these purposes if we can get a copy from the seller?
Readers’ comments would be appreciated. Query 20,274 – Devon Cream.
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