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Is relief available from double IHT charge?
Is relief from a double IHT charge available under the Inheritance Tax (Double Charges Relief) Regulations 1987, SI 1987/1130 where an individual (D) transfers an asset to a trust under which D can benefit, the trustees appoint the asset back to D and D dies within seven years of both the initial transfer and the appointment?
Query 20,131 – Arboreum.
VAT registration dilemma.
Our client Jack is a property investor and holds a large portfolio via a number of limited companies.
He regularly incurs expenditure on capital improvements – such as erecting a loft or building an extension – and of course on ongoing maintenance of his properties – such as painting and decorating between tenancies, on-call small repairs and so on.
Over the years Jack developed a working relationship with Peter, an experienced builder, and it is now Peter that undertakes all building and maintenance work for Jack’s companies.
When preparing the accounts for Jack’s companies, we noticed that invoices were raised by Peter (via Peter Maintenance Limited) of £45,000 to one of Jack’s companies; £32,000 to another, and £8,000–£12,000 each to a number of Jack’s other companies – all within year 2021.
Peter’s invoices do not refer to VAT registration and we can think of no reason for which the services would not be subject to VAT at either the standard or reduced rates.
Having considered each of Jack’s companies, we are comfortable that CIS should be applicable here.
We do not act for Peter but we wonder whether ongoing supplies by Peter to our client, which strongly indicate that VAT registration ought to be in place by Peter, expose us or our client Jack to reporting obligations.
Could readers share their thoughts on the matter?Query 20,132 – Emil.
Is HMRC correct to refuse exemption from registration?
One of my clients is an artist and has just completed a big order from a wealthy customer in America for £120,000.
The sale of these paintings meant that his turnover in the 12-month period to 31 January 2023 exceeded the registration threshold of £85,000, producing a registration date of 1 March 2023. As the sale was zero-rated as an export of goods, we asked HMRC for an exemption from registration on the basis that returns would be repayments in the future.
However, HMRC has rejected our request because my client cannot guarantee that his future sales will all be exports – in the past, he has done some UK sales but only for about £10,000 to £20,000 each year.
He doesn’t want to register for VAT because his UK customers are private individuals and he doesn’t have much input tax to claim.
He also wants to avoid the challenges of MTD and online issues. His argument against registering for VAT is that he will only ever exceed £85,000 of annual sales if a wealthy overseas customer shows an interest in his paintings – like with the American buyer – and therefore his domestic sales will always be around £20,000 each year.
I would be interested in readers’ views about whether HMRC’s approach is correct in accordance with the legislation? If so, are there any other ways for my client to avoid registering from 1 March 2023?Query 20,133 – Turner.
What is the tax point for registration purposes?
One of my clients owns a large residential property at a seaside resort which is rented out on Airbnb as holiday accommodation.
The client is not VAT registered but his income is approaching the £85,000 annual sales threshold.
My query concerns the timing of his income as far as the threshold test is concerned.
Basically, holiday makers will pay a part or full payment to Airbnb through an online booking but this payment will be fully refunded if the guests cancel within two weeks of the start of their booking.
Does this mean that my client will only treat the booking as a sale for VAT registration purposes at the point when the customer is no longer entitled to a refund?
Or is the tax point at the end of their holiday, which could fall into the following month.
Finally, I am assuming that the income for VAT registration purposes is the gross amount of the booking not the amount paid by Airbnb after they have deduced their commission? My client wants to delay VAT registration as long as possible – understandably.
Readers’ thoughts would be appreciated.Query 20,134 – Bournemouth Babe.
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