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Rollover relief
Availability of rollover relief on split use premises.
Our client has sold land used in his sole trader business and has acquired a new property consisting of land and an industrial building.
The new property will be used by his existing sole trade, but part of the building will also be used by his personal trading company, which previously operated from rented premises.
In these circumstances, can our client roll over the gain on the land into the cost of the land and building acquired, or will the partial use by his personal company mean the relief will be denied?
I look forward to receiving readers’ responses.
Query 19,859 – Roland.
Life assurance
Taxation of German life assurance policies.
My client is 61 years old and has been a UK resident for 18 years. He has two German life assurance policies.
The first policy was a foreign life insurance policy of 20 years. Under its terms, the proceeds on maturity were paid out in full in accordance with the original policy agreement (to a now non-resident client). There was no tax deduction as the policy met the German policy qualifying rules as a pre-2005 capital-forming life insurance policy. The UK taxation treatment upon maturity appears to be as a non-qualifying policy less a small amount of non-residence relief. There is no chargeable event certificate.
On this policy, there were main contributions and accident insurance (nominal amount) contributions. On maturity the payout consisted of four categories: sum insured, profit share, excess and participation in reserves.
The second policy came about due to the immediate investment of the life insurance policy funds upon maturity of the first policy, by the same overseas based insurance company, into a new standalone German purchased life annuity policy for pension provision for a non-resident.
The annuity income figures have been reported to the German authorities and the investment appears to have been categorised as an investment of capital from taxed income. The reported figures show 100% of the annuity payments, in other words there is no reduction for the capital investment.
Could readers assist me on the UK tax position of the first policy, including any reliefs that might be available, and the calculation of the chargeable event.
For the second policy, can a request be made for taxation of the interest only, and if so how could this be calculated?
Query 19,860 – Unsure..
Inheritance tax
Inheritance tax on transfer of family home.
A married parent gifted their child the family home but continued to live there with him.
During this time the married parent did not pay market rent for their occupation. When the parent eventually died the house was worth more than the residence nil rate band. Inheritance tax has become payable as the house was a gift with reservation of benefit.
Through a deed of variation, it was arranged that the child passed the house to the deceased’s surviving spouse. Would this be counted as a transfer between husband and wife and be treated as exempt from inheritance tax? Is any inheritance tax then payable by the deceased’s estate or the surviving spouse on the house?
I look forward to readers’ responses.
Query 19,861 – Confused.
Input tax challenge
Pre-registration input tax challenge.
I am confused by the input tax rules on services incurred before VAT registration.
I have a client who has just registered for VAT – he runs an estate agency business. HMRC’s guidance says that he can claim input tax on services received in the six-month period before VAT registration but not if the service has already been consumed.
To give an example, he registered for VAT on 1 October 2021, and his landlord issued an invoice on 1 July 2021 for £18,000 plus £3,600 VAT for premises rent up to 31 December 2021. So, if my understanding is correct, he can claim half of this VAT; in other words, £1,800 for the period from 1 October 2021, ie when he is registered. The period from 1 July to 30 September has already been consumed.
With regard to telephone bills, presumably he can claim line rental costs for the six-month window, but not calls because they are consumed at the time of making the call?
And finally, my client pays a VAT registered photographer to take photos of new property listings. Am I right in saying that my client can claim input tax for invoices raised in the six months before registration, as long as the property in question is sold after my client has registered for VAT?
Any advice from readers in clarifying these complicated rules would be appreciated.
Query 19,862 – LB.
